UK Trade & Investment

International Business Strategies, Barriers & Awareness Monitoring Survey 2012

Research Report

August 2012

JN: 4317

# Table of Contents

1. Executive Summary ........................................................................................................... 1\
   1.1 Introduction ........................................................................................................ 1\
   1.2 Summary Results .............................................................................................. 1
2. Introduction .................................................................................................................... 12
3. Research Objectives ....................................................................................................... 13
4. Methodology .................................................................................................................. 14\
   4.1 Coverage ......................................................................................................... 14\
   4.2 Sample Design ................................................................................................ 14\
   4.3 Questionnaire Design ...................................................................................... 15\
   4.4 Fieldwork ......................................................................................................... 15\
   4.5 Analysis & Weighting ....................................................................................... 16
5. Awareness & Usage ....................................................................................................... 19\
   5.1 Awareness & Use of UKTI ............................................................................... 19\
   5.2 Awareness of the Intellectual Property Attaché Network .................................. 23
6. Profile ............................................................................................................................. 25\
   6.1 Age of Business ............................................................................................... 25\
   6.2 Size of Business (Employees) ......................................................................... 27\
   6.3 Size of Business (Turnover) ............................................................................ 29\
   6.4 Industry Sector ................................................................................................ 31\
   6.5 Ownership ....................................................................................................... 33
7. Innovation & Product/Service Development ................................................................. 34\
   7.1 Innovative Firms .............................................................................................. 34\
   7.2 IP Active Firms ................................................................................................ 37\
   7.3 Young, Technology Intensive Firms ................................................................. 40\
   7.4 Innovative High Growth Firms ......................................................................... 41\
   7.5 Planned Product & Service Development ....................................................... 42\
   7.6 Geographical Focus of Product & Service Development ............................... 46\
   7.7 Key Markets Driving Innovation ....................................................................... 50
8. Overseas Activity & Experience

8.1 Modes Used

8.2 Number & Type of Overseas Sites

8.3 Direct Web Sales

8.4 Importing

8.5 Internationalisation Modes by Firm Profile

8.6 Number of Modes Used

8.7 Export Experience

8.8 Intermittent Exporters

8.9 Proportion of Turnover Accounted for by Overseas Sales

8.10 ‘Born Global’ Firms

8.11 Number of Markets

8.12 Overseas Regions

8.13 Senior Management Experience

9 Business Growth & Overseas Strategy

9.1 Past Growth

9.2 Future Growth

9.3 How Growth Objectives Will Be Achieved

9.4 Management Strategy for Achieving Growth Objectives

9.5 Management Strategy for Developing Overseas Business

9.6 Business Planning

9.7 Expected Overseas Growth

9.8 Difficulties Accessing Finance

10. Emerging & Fast Growing Markets

10.1 Opportunities in Emerging & Fast Growing Markets

10.2 Reasons for Not Doing Business in Emerging & Fast Growing Markets

11. Overseas Business Risks

11.1 Attitude to Risk

11.2 Impact of Perceived Risks on Overseas Activity

11.3 Risk Perception of BRIC Markets 12. Market Entry Motivations & Preparations ............................................................. 123 12.1 Market Entry Motivations ............................................................................... 123 12.2 Market Entry Preparations ............................................................................. 129 13. Barriers to Overseas Trade .................................................................................. 133 13.1 Barriers (Summary) ....................................................................................... 133 13.2 Barriers (Detailed) ......................................................................................... 148 14. Marketing Channels ............................................................................................. 160 14.1 Usage & Usefulness ...................................................................................... 160 14.2 Social Networking Sites ................................................................................. 163

Annex A: Markets Selected ......................................................................................... 165 A.1 Most Recent Market ...................................................................................... 165 A.2 Most Challenging Market ............................................................................... 166 Annex B: Questionnaire .............................................................................................. 167

1. Executive Summary

1.1 Introduction

This research gathers evidence about trends in UK businesses’ international business strategies, barriers faced by internationalising firms, awareness and usage of UKTI, and related issues.

The data was collected through a quantitative telephone survey of 900 internationalising firms. The sample was structured to provide robust number of interviews with 3 business age groups (0-5 years, 6-10 years and over 10 years), and all data has been weighted by age of firm to account for the disproportionate stratified sampling approach.

1.2 Summary Results

1.2.1 Awareness & Usage of UKTI

Firms were asked whether they had heard of either UK Trade & Investment or the commercial services provided by British embassies and consulates overseas, and whether they had used either of these.

| Table 1.2.1.1 Awareness & Use of UKTI | |---------------------------------------| | **Base** | **Total** | **UKTI Usage** | | | | **UKTI User** | **Non-User** | | Aware (at least one) | 900 | 189 | 711 | | - UK Trade & Investment or UKTI | 70% | 100% | 61% | | - Commercial services provided by embassies and consulates overseas | 56% | 91% | 46% | | Used (at least one) | 24% | 100% | 0% | | - UK Trade & Investment or UKTI | 18% | 74% | 0% | | - Commercial services provided by embassies and consulates overseas | 15% | 65% | 0% |

Awareness of the UKTI name itself stands at 56%, with slightly lower awareness of the services provided by overseas posts (51%). Overall, 70% of internationalising firms had heard of either UKTI or the commercial services provided by overseas embassies and consulates, and approaching a quarter (24%) have used any UKTI or posts services.

Not all UKTI users have actually heard of ‘UK Trade & Investment’, with awareness currently at 91%. The remaining 9% have used the services provided by overseas posts but not realised the link to UKTI. Only 46% of non-users recognised the UKTI name, indicating that there are a significant number of internationalising firms that could benefit from UKTI’s services but have never heard of the organisation.

Awareness and usage levels increase amongst both larger and older firms and those with more experience of doing business overseas. It is also clear that innovative, IP active and growing firms are more engaged with UKTI, with awareness and usage levels significantly higher amongst these groups. As seen below, overall awareness (i.e. of either UKTI or posts services) has remained relatively steady over the past few years. However, the proportion of internationalising firms that have heard of the UKTI name itself has increased steadily over this period, from 51% in 2010 to 56% currently.

Table 1.2.1.2 Awareness & Use of UKTI – Over Time

| | Internationalisation Survey | |----------------------|-----------------------------| | | 2008 | 2010 | 2011 | 2012 | | **Base** | 900 | 902 | 903 | 900 | | Aware (at least one) | 68% | 68% | 71% | 70% | | - UK Trade & Investment or UKTI | 51% | 51% | 53% | 56% | | - Commercial services provided by embassies and consulates overseas | 55% | 53% | 56% | 51% | | Used (at least one) | N/A | 27% | 29% | 24% | | - UK Trade & Investment or UKTI | N/A | N/A | 22% | 18% | | - Commercial services provided by embassies and consulates overseas | N/A | N/A | 18% | 15% |

1.2.2 Business Profile

The table below provides a comparison of the key business characteristics of UKTI users and non-users.

Table 1.2.2.1 Business Profile

| Profile | Total | UKTI Usage | |--------------------------|-------|------------| | | | UKTI User | Non-User | | **Base** | 900 | 189 | 711 | | Age | | | | | 0-5 years | 17% | 7% | 20% | | 6-10 years | 23% | 19% | 25% | | Over 10 years | 60% | 73% | 56% | | Sector | | | | | Production | 29% | 36% | 27% | | Services | 71% | 64% | 73% | | Size (employees) | | | | | 0-9 employees | 68% | 48% | 74% | | 10-249 employees | 30% | 45% | 25% | | 250+ employees | 3% | 6% | 1% | | Size (turnover) | | | | | Up to £500k | 45% | 30% | 49% | | £500k - £2m | 27% | 29% | 27% | | £2m - £10m | 13% | 19% | 12% | | Over £10m | 8% | 15% | 5% |

UKTI users tend to be older than non-users and are slightly more likely to be operating in the production sector. They are also significantly larger than non-users in terms of both employee numbers and annual turnover, although it should be noted that almost half of UKTI users still have less than 10 staff. 1.2.3 Innovation & Product/Service Development

One of the most notable differences between users and non-users of UKTI services is in the area of innovation. The former are significantly more likely to be classed as 'innovative' (by both definitions). UKTI users are also more inclined to obtain patents, trademarks or other legal protection for their products and services, and hence be defined as 'IP active'.

Table 1.2.3.1 Innovation Profile

| Profile | Total | UKTI Usage | |--------------------------|-------|------------| | | | UKTI User | Non-User | | Base | 900 | 189 | 711 | | Innovation classifications| | | | | Innovative | 75% | 84% | 72% | | Innovative (alternative) | 46% | 57% | 43% | | IP active | 22% | 38% | 18% |

As seen below, UKTI users are significantly more likely to engage in some sort of product or service development over the next 3 years. They are also more likely to develop completely new products/services rather than just modifying existing ones.

Table 1.2.3.2 Planned Product and Service Development Activity

| Activity | Total | UKTI Usage | |--------------------------------------------------------------------------|-------|------------| | | | UKTI User | Non-User | | Base | 900 | 189 | 711 | | Anticipating product/service development activity in next 3 years | 78% | 87% | 76% | | - Develop new products/services | 64% | 74% | 61% | | - Make fundamental changes or modifications to existing products/services| 42% | 47% | 40% | | - Make more cosmetic changes or modifications to existing products/services| 42% | 49% | 40% | | Not anticipating product/service development activity in next 3 years | 21% | 13% | 24% | | Don't know | 0% | 1% | 0% | 1.2.4 Overseas Activity & Experience

Firms were asked which internationalisation modes they had been involved in over the last five years (or were planning to do in the next year in the case of those that were not yet doing any business overseas(^1)).

| Table 1.2.4.1 Internationalisation Modes | |------------------------------------------| | **Total** | **UKTI Usage** | | | **Base** | 900 | 189 | 711 | | **Different Modes Used** | | | | | Selling direct | 91% | 93% | 91% | | - ‘Web only’ exporters | 5% | 1% | 6% | | Agents/distributors | 40% | 58% | 35% | | Contractual arrangements | 15% | 23% | 13% | | Overseas site | 12% | 21% | 10% | | - Manufacturing/assembly | 3% | 7% | 2% | | - Call centre | 1% | 3% | 1% | | - Sales/service delivery | 11% | 18% | 8% | | - R&D | 4% | 7% | 3% | | Importing | 57% | 61% | 56% | | **Number of Modes Used** | | | | | One | 58% | 38% | 65% | | Two | 28% | 38% | 25% | | Three | 10% | 15% | 8% | | Four | 4% | 8% | 2% |

The vast majority of internationalising firms sell direct to businesses or individuals overseas, and two-fifths use agents or distributors. Selling through contractual arrangements (e.g. licensing, franchising, etc) and operating overseas sites is less common, but a significant minority of firms still adopt these approaches.

A small minority of internationalising firms are ‘web only’ exporters, in the sense that they do not sell overseas through any other channel and do not use any other internationalisation modes.

In comparison to non-users, UKTI users are significantly more likely to sell through agents/distributors, use contractual arrangements and operate their own overseas sites. The same is true of larger firms, innovative firms, those active in more overseas markets and those that plan to grow ‘substantially’ over the next 5 years.

Over half of all internationalising firms (58%) are only using a single mode when doing business overseas, although UKTI users are more likely to adopt multiple approaches.

(^1) Please note that 68 of the 900 firms interviewed (8%) were not yet doing business overseas but qualified for the research on the basis that they were planning to do so in the next year. The table below provides details of the comparative overseas experience of UKTI users and non-users.

Table 1.2.4.2 Overseas Experience

| Profile | Total | UKTI Usage | | | |-------------------------------|-------|------------|----------|----------| | | | UKTI User | Non-User | | Base | 900 | 189 | 711 | | Years exporting | | | | | | Less than 2 years | 16% | 11% | 18% | | 2-10 years | 46% | 37% | 48% | | Over 10 years | 38% | 51% | 34% | | Number of markets | | | | | | None (not yet exporting) | 6% | 5% | 6% | | 1-5 markets | 47% | 35% | 51% | | 6-10 markets | 20% | 17% | 21% | | Over 10 markets | 26% | 43% | 20% | | Overseas sales (proportion of total turnover) | | | | | | Up to 10% | 53% | 39% | 57% | | 11-25% | 15% | 18% | 13% | | 26-50% | 10% | 12% | 10% | | Over 50% | 18% | 25% | 16% |

Across all of the above measures, it is clear that UKTI users tend to have significantly greater overseas experience than non-users. They have been operating overseas for longer, they are typically active in more markets, and export sales account for a significantly greater proportion of their total turnover.

However, that is not to say that all UKTI clients are experienced exporters, with around 1 in 10 having been doing business overseas for less than 2 years. Furthermore, two-fifths are in 5 markets or less and a similar proportion indicate that overseas sales contribute less than 10% of their annual turnover. 1.2.5 Business Growth & Strategy

The table below provides details of the growth trajectory of internationalising firms and the extent to which they have strategies and plans in place for how their growth will be achieved.

Table 1.2.5.1 Business Growth & Strategy

| Profile | Total | UKTI Usage | |--------------------------------|-------|------------| | | | UKTI User | Non-User | | Base | 900 | 189 | 711 | | Past growth (last 5 years) | | | | | Grown substantially | 20% | 26% | 18% | | Grown moderately | 43% | 39% | 45% | | Remained same size | 20% | 21% | 20% | | Become smaller | 14% | 12% | 14% | | Future growth (next 5 years) | | | | | Grow substantially | 27% | 32% | 25% | | Grow moderately | 54% | 57% | 53% | | Remain same size | 15% | 10% | 17% | | Become smaller | 2% | 0% | 3% | | Management growth strategy | | | | | Very clear strategy | 43% | 45% | 43% | | Fairly clear strategy | 42% | 45% | 41% | | No clear strategy | 13% | 7% | 15% | | Current written business plan | | | | | Yes (or in development) | 52% | 67% | 47% | | No | 46% | 32% | 50% |

Approaching two-thirds of internationalising firms (63%) have grown over the past 5 years and over three-quarters (81%) anticipate further growth over the next 5 years, although in both cases this growth is more likely to be ‘moderate’ than ‘substantial’.

UKTI users appear to be more dynamic than non-users, in the sense that they are significantly more likely to report ‘substantial’ growth over the past 5 years and also more likely to be planning to grow over the next 5 years.

The vast majority of internationalising firms (85%) believe that their senior management team has at least a reasonably clear strategy in place for how they will achieve their growth objectives, and this is slightly more likely to be the case for UKTI users.

UKTI users also have a more formal approach to business planning, with two-thirds having a current written business plan compared to fewer than half of non-users. Firms were also asked a number of questions relating to the expected growth of their overseas operations and the associated strategies they had in place.

Table 1.2.5.2 Overseas Growth & Strategy

| Profile | Total | UKTI Usage | |----------------------------------------------|-------|------------| | | | UKTI User | Non-User | | **Base** | 900 | 189 | 711 | | **Number of overseas markets (next 3 years)**| | | | | Increase | 48% | 52% | 47% | | Stay the same | 47% | 44% | 48% | | Decrease | 4% | 3% | 4% | | **Exports as % of turnover (next 3 years)** | | | | | Higher | 47% | 53% | 44% | | About the same | 43% | 40% | 43% | | Lower | 7% | 5% | 8% | | **Management overseas strategy** | | | | | Very clear strategy | 29% | 38% | 26% | | Fairly clear strategy | 32% | 37% | 30% | | No clear strategy | 37% | 25% | 41% |

Internationalising firms tend to have a fairly positive outlook when it comes to the development of their overseas business, with approaching half expecting to enter new markets over the next 3 years and a similar proportion anticipating that export sales will become more important to their business (in terms of the proportion of turnover that they account for). Very few firms predict a decline in either of these areas.

Although UKTI users appear to be slightly more likely to anticipate growth in their overseas business, the differences are not particularly pronounced (and in the case of number of markets, the difference is not statistically significant).

The majority of firms (61%) report that their senior management team has at least a reasonably clear strategy for the development of their overseas business, although this is considerably lower than the 85% that had a clear strategy in place for the development of their business as a whole (as detailed on the previous page). UKTI users have a significantly greater strategic focus on their overseas development, with three-quarters having a management strategy in place (compared to 56% of non-users). 1.2.6 Emerging & Fast Growing Markets

Firms were read out a list of various emerging or fast growing markets and asked how likely they were to do business in each one over the next 2 years. If firms indicated that they were unlikely to enter one or more of these markets, they were asked for their reasons.

Table 1.2.6.1 Opportunities in Emerging & Fast Growing Markets

| Likelihood of entering any emerging / fast growing markets in next 2 years | Total | UKTI Usage | |---|---|---| | | Base: All firms | 900 | 189 | 711 | | Already in | 41% | 54% | 37% | | Very likely | 12% | 11% | 12% | | Quite likely | 23% | 21% | 24% | | Unlikely | 24% | 14% | 27% |

| Reasons for not considering emerging / fast growing markets | Total | UKTI Usage | |---|---|---| | | Base: All unlikely to enter a mkt | 784 | 160 | 624 | | Focussing on other countries | 60% | 71% | 57% | | Little or no demand | 55% | 48% | 57% | | Too difficult | 37% | 38% | 36% | | Never thought about it | 34% | 30% | 35% | | Too risky | 25% | 22% | 25% |

As seen above, two-fifths (41%) of internationalising firms are already doing business in at least one of the emerging/fast growing markets, and most of the remainder feel that they are very or quite likely to do so in the next 2 years. In terms of specific markets, the UAE, India and China are felt to represent the best opportunities, but firms are least enthusiastic about doing business in Mexico.

Over half of UKTI users are already in at least one of these markets and only 14% feel that they are unlikely to enter one. In contrast, over a quarter of non-users are not in any emerging/fast growing markets and have no intention of entering any.

The likelihood of a firm trading in fast growing markets also increases with age, size and export experience. However, it is certainly not the case that these markets are only targeted by more established firms, as around a third of firms established in the last 5 years and a third of those with 0-9 employees are already doing business in at least one of these countries.

When comparing results with previous waves of this survey, there appears to have been a general decline in the proportion of firms that are active in emerging and fast growing markets, down from a high of 48% in 2010 to 41% currently. This pattern is evident for both users and non-users of UKTI.

Most firms not targeting an emerging/high growth market indicate that this is because they are either focussing on other markets instead or there is little/no demand for their products and services. However, a significant minority highlighted the perceived difficulties and/or risks associated with doing business in these markets. 1.2.7 Overseas Business Risks

Firms were asked to assess their attitude to risk when doing business overseas. As detailed below, the majority of firms are willing to take calculated risks if the potential benefits are clear, and only 13% are entirely risk averse. There are no statistically significant differences in the attitude to risk between users and non-users of UKTI.

Table 1.2.7.1 Attitude to Risk

| | Total | UKTI Usage | |--------------------------------------|-------|------------| | | Base | UKTI User | Non-User | | It's never worth taking any risks | 13% | 9% | 14% | | It's sometimes worth taking risks providing the commercial benefits are clear | 62% | 63% | 62% | | To be a successful business you have to take risks | 24% | 27% | 23% |

Firms were also asked if they had been put off from doing business in a particular country because of various specific risks.

Table 1.2.7.2 Impact of Perceived Risks on Market Entry

| Proportion put off from entering a market due to the risk of... | Total | UKTI Usage | |---------------------------------------------------------------|-------|------------| | | Base | UKTI User | Non-User | | Not being paid in full or on time | 49% | 54% | 47% | | Political or economic instability | 37% | 45% | 35% | | Not seeing return on investment | 35% | 52% | 30% | | Bribery, corruption or organised crime | 32% | 44% | 29% | | IP Theft | 29% | 38% | 26% | | Safety or security of staff | 25% | 37% | 22% | | None of these | 30% | 18% | 33% | | Net: Put off by any risk | 70% | 83% | 67% |

Overall, 70% of firms have been put off from entering an overseas market due to one of the above risks. The risk of not being paid (in full or on time) is the most significant deterrent to overseas expansion, but all of the individual risks tested have a significant impact on the behaviour of internationalising firms, with at least 25% reporting that they have decided market entry because of each one. There is clear evidence that UKTI users are more likely to have abandoned their market entry plans due to the risks involved.

When asked specifically about the risks involved in the BRIC markets, firms were most concerned about doing business in Russia, with 59% describing it as very or fairly risky. This was followed by China (45%) and then Brazil and India (40% each). In each case, firms that were already doing business in these markets were much less concerned about the risks involved, suggesting that some firms are being deterred by a perception that these markets are high risk when the reality may not be as bad as they fear. 1.2.8 Barriers to Overseas Trade

Firms were asked to identify the ‘most challenging’ overseas market in which they had done business over the last 5 years, and were then read out a number of potential difficulties and asked to indicate the extent to which they had encountered each one in this market. These have been combined into 7 summary barriers, and the table below shows the proportion of firms experiencing ‘significant’ difficulties with each one.

Table 1.2.8.1 Summary Barriers

| Base: All exporters | Total | UKTI Usage | Non-User | |---------------------|-------|------------|----------| | | 832 | 178 | 654 | | At least one significant barrier | 57% | 72% | 52% | | - Legal & regulatory barriers | 37% | 43% | 35% | | - Customs barriers | 24% | 29% | 23% | | - Contacts barriers | 24% | 34% | 20% | | - Information barriers | 10% | 12% | 9% | | - Resource barriers | 15% | 19% | 14% | | - Language & cultural barriers | 16% | 20% | 14% | | - Bias barriers | 12% | 18% | 10% | | No significant barriers | 43% | 28% | 48% |

Over half of internationalising firms have experienced at least one significant barrier in their most challenging market, confirming that there is a clear need for external assistance to help firms overcome these barriers and successfully trade overseas. Reflecting the results from previous UKTI studies, legal and regulatory barriers prove the most common barrier experienced at 37%, but a quarter of firms have also encountered customs and contacts barriers.

UKTI users clearly come across more significant barriers than non-users, with 72% experiencing at least one, compared to just 52% of non-users. More experienced exporters, innovative firms and those using more advanced internationalisation modes (i.e. contractual arrangements and operating overseas sites) are all more likely to experience significant barriers to overseas trade. It is also clear that firms are more likely to encounter barriers when targeting high growth markets or other markets outside of the EEA.

Given that UKTI users are more likely to meet all of the above criteria (e.g. more experienced exporters, innovative, etc) the differences in the barriers experienced by users and non-users could simply be a function of their different profile. However, when further analysis is conducted on a like-for-like basis by comparing firms that operate in the same number of markets and comparing those answering about the same ‘type’ of market (e.g. high growth), the difference between users and non-users is still very evident. This suggests that there is a ‘true’ distinction between users and non-users and that the increased likelihood of the former reporting barriers is not just because they operate in a greater number of markets and/or more challenging markets. Interestingly, firms with ‘substantial’ growth aspirations are also more likely to encounter significant barriers, suggesting that they are most in need of external assistance to enable them to fulfil their growth ambitions. 2. Introduction

UK Trade & Investment (UKTI) commissioned this research in order to gather evidence about trends in UK businesses’ international business strategies, barriers faced by internationalising firms, awareness and usage of UKTI, and related issues.

The study was designed with a view to the results helping to inform UKTI policy development and other aspects of UK Government policy relating to international trade and investment and the ability of British business to optimise opportunities in global markets.

The survey was intended to complement evidence already available from other surveys of UK business, in particular:

- The Community Innovation Survey, which is nationally representative of firms with at least 10 employees, and captures some evidence about international aspects of innovation activity, including international partnerships and other linkages, as well as export activity;
- UKTI’s Performance and Impact Monitoring Survey (PIMS) of businesses who have used UKTI trade services, which also captures some contextual evidence about overseas business experience and aspects of strategy;
- UKTI’s annual survey of exporters who have not used UKTI trade services, which gathers evidence about some aspects of overseas business strategy as well as evidence about barriers to overseas business and associated needs for external help.

The ‘International Business Strategies, Barriers & Awareness Monitoring Survey’ replaced the former annual UKTI awareness survey. It is undertaken on an annual basis, and this is the fifth wave conducted to date. Whilst the core content of the survey is kept consistent each year, there is variation in some of the topics covered. This ensures that the survey provides consistent annual monitoring data where needed, but also captures data on other topical issues at less frequent intervals.

The 2012 survey provides new, interesting and robust evidence on:

- The extent to which firms have clear strategies in place – both for achieving their growth aims and for developing their overseas business
- The extent to which firms are looking to realise their growth ambitions by focussing on new or existing customers, markets and products/services
- The degree to which overseas expansion is affected by the perceived risks involved – with a particular focus on risk perceptions of the BRIC markets
- The reasons why firms are not attracted to high growth markets
- Whether certain markets are a key stimulus for innovation (and which ones)

It also continues to track the following key areas:

- Awareness and use of UKTI amongst internationalising firms
- Activity and interest in high growth markets
- Barriers to overseas development
- The business characteristics of UKTI users and non-users, including profile, growth, innovation and export experience/approach

3. Research Objectives

In terms of the specific research aims, the study was required to provide robust evidence to:

- Understand the role of international market diversification in business development strategies, including its effects on revenue growth and resilience, profitability and return on investment in new product development
- Track awareness of, and potential interest in, selected emerging and high growth markets
- Understand links between innovation, R&D and overseas business development, including links between innovation and mode of market entry, and the extent to which these may differ across markets
- Understand the barriers encountered by UK businesses in seeking to develop overseas business, including issues relating to intellectual property protection, both for new exporters and for firms seeking to enter new markets
  - The survey should also seek to identify how these may vary across markets, and by the characteristics of the firm, such as by innovation, size and previous export experience
- Identify business needs for external help to overcome barriers and to address the knowledge and skill needs associated with developing overseas business, including issues related to exploiting and protecting intellectual property rights
  - The survey should also seek to identify how these barriers and needs may vary by business size, innovation and previous export experience
- Identify awareness and use of UKTI support, including government support relating to the intellectual property issues associated with doing business overseas
- Capture evidence about the characteristics of users and non-users of UKTI services, including innovation activity, scope of international business and modes of internationalisation employed.

This study built on the four previous survey waves, replicating the previous methodology so as to provide consistent year-on-year data, whilst developing the previous questionnaire to ensure that the 2012 objectives were fully addressed. 4. Methodology

The research was conducted via quantitative CATI(^2) interviews, administered by a specialist team of business-to-business researchers with extensive experience of conducting similar studies with this type of audience.

4.1 Coverage

A total of 900 interviews were conducted with a random sample of firms involved in overseas business activities, covering the full range of internationalisation modes such as selling to overseas customers directly, selling through agents or distributors, doing business overseas via licensing, franchising and other contractual agreements, and operating overseas sites. Whilst data was collected on import activity, only those firms also involved in other overseas business activities were eligible for interview.

Whilst the majority of the sample (832 of the 900 interviews) were involved in at least one of these forms of internationalisation at the time of the interview, a small number (68) were not yet doing business overseas. However, to be eligible for the study these firms had to indicate that they were planning to start selling overseas in the next year.

4.2 Sample Design

Since one of the key objectives of this research was to ensure coverage of firms doing overseas business via the full range of modes, and not just simply exporting in the traditional sense, the sample frame was built from a random sample of UK businesses which was then screened to identify those engaged in overseas business. This approach had the further advantage of allowing the identification and inclusion of firms that were not yet exporting (but planning to start in the next year).

The initial sample frame was sourced from a Companies House-based list provided by Experian, with the sample stratified by age of firm. A disproportionate sample design was adopted in order that a robust number of interviews were conducted with 3 age groups of firms (0-5 years, 6-10 years and over 10 years).

In order that the incidence within the sample frame of firms eligible for interview (i.e. engaging in international business activity) was kept to within sensible limits, a small number of industry sectors where export propensity is very low were excluded from the initial sample frame. The exclusions were made on the basis of analysis of data from the Community Innovation Survey (CIS) on the incidence of exporting for individual industry sectors by age group(^3). The available data only enabled exclusions to be made at the level of 2-digit SIC codes, but a number of more detailed sub-sectors were also excluded based on both common sense and the research team’s experiences of the previous surveys and pilot sessions (e.g. sub-post offices, taxi firms, dispensing chemists, etc).

Both users and non-users of UKTI were included in the research, but the initial sample was screened against a list of firms that had been interviewed in the most recent main PIMS surveys so as not to over-burden businesses.

(^2) Computer Assisted Telephone Interviewing. (^3) Based on analysis by Professor Richard Harris, University of Glasgow. 4.3 Questionnaire Design

Strong emphasis was placed on questionnaire design in the early stages of this project to ensure that the questionnaire was easily understandable, flowed logically, was of an acceptable length and was capable of delivering high quality data across all the areas necessary to answer the research objectives.

Given that some of the question areas had not been covered in previous studies, an initial qualitative piloting phase was undertaken to help test and develop these questions. This consisted of a total of 4 in-depth, less-structured interviews to ensure that the new question areas made sense to respondents and covered all of the pertinent issues.

Following this qualitative phase the questionnaire was revised where necessary, and then a full ‘live’ quantitative pilot was conducted on CATI. This took place over the course of 2 days and involved OMB executives and UKTI representatives listening to ‘live’ interviews conducted by the telephone research team. Based on this session, further changes were then made to the questionnaire script prior to the start of main fieldwork. A copy of the final questionnaire is appended to this report.

4.4 Fieldwork

Main fieldwork was conducted between March and May 2012, and interviews lasted an average of c.20 minutes.

The following table summarises the number of sample records selected for CATI, the number of records lost due to screening-out or incorrect contact details, and the number of interviews completed along with the associated response rate.

| CATI SCREENING | | |-----------------------------------------------------|----------| | Selection for CATI | 13,384 | | - Unusable: No overseas business activity | 8,356 | | - Unusable: Other reason (e.g. contact details incorrect) | 2,107 |

| INTERVIEWS / RESPONSE RATES | | |-----------------------------------------------------|----------| | Total useable sample | 2,921 | | Interviews achieved | 900 | | Response rate (%) | 31% | | Refusal rate (%) | 46% | 4.5 Analysis & Weighting

4.5.1 Weighting

All of the core sample data has been weighted to account for the disproportionate nature of the sample design (i.e. the disproportionate sampling by age of firm). The weighting regime uses data from the 2007/8 Annual Small Business Survey on the age profile of UK exporters (displayed below), with the data weighted to the profile shown below.

| Age profile of UK exporters (2007/8 ASBS) | Age profile of interviewed firms | Weighting | |------------------------------------------|---------------------------------|-----------| | Up to 5 years | 16.8% | 28.1% | 0.60 | | 5-10 years | 23.4% | 28.3% | 0.83 | | More than 10 years | 59.8% | 43.6% | 1.37 |

4.5.2 Base Size Descriptions

Under each chart in this report is a base description, which provides details of which firms the analysis is based on (e.g. All respondents, All exporters, etc), the unweighted number of firms included in the analysis, and the percentage falling into any categories that are not shown in the chart itself (e.g. ‘Don't know/refused’ responses).

For example, the base description below indicates that the analysis is based on all firms that are currently exporting, the ‘total’ results in the chart are based on 832 firms, and 3% of these answered ‘don’t know’ to this particular question. It also shows that the ‘UKTI users’ results are based on 178 firms (1% of whom answered ‘don't know’) and the ‘Non Users’ results are based on 654 firms (4% of whom answered ‘don't know’)

Example Base: All currently exporting (Base, Don’t know) Total (832, 3%), UKTI Users (178, 1%), Non-Users (654, 4%)

4.5.3 Statistical Significance

Throughout this report, any differences between types of firm that are referred to as being ‘significant’ are statistically significant at the 95% level of confidence. In some cases apparent differences that are not statistically significant at this level have been highlighted, but made clear that they are not significant. 4.5.4 Analysis Definitions

Throughout this report, sub-analysis has been provided by a number of variables relating to key business characteristics. Some of these are constructed from a number of different survey questions, and the following provides details of how these variables have been defined.

| Innovative Firms | |------------------| | Firms have been defined as ‘innovative’ if they… | | • Have more than one employee engaged in R&D activity and more than one employee engaged in new product/service development | | • Or, have commissioned external R&D or new product/service development activity in the last year | | • Or, have introduced new products or services in the last 3 years except firms established in the last 2 years |

| Innovative Firms (Alternative, Tighter Definition) | |--------------------------------------------------| | Firms have been defined as ‘innovative’ under the alternative, tighter definition if they … | | • Have more than one employee engaged in R&D activity and more than one employee engaged in new product or service development and at least some employees are involved in the development of scientific or technical knowledge not commonly available | | • Or, have commissioned external R&D or new product/service development activity in the last year | | • Or, have introduced new products or services in the last 3 years and these are ‘new to the world’ or ‘new to the sector’ |

| IP Active Firms | |-----------------| | Firms have been defined as 'IP Active' if they… | | • Have applied for or obtained any patents, trademarks or other legal protection for their products or services, either in the UK or overseas |

| Young, Technology Intensive Firms | |----------------------------------| | Firms have been defined as being ‘young, technology intensive’ if they… | | • Have been established for 5 years or less | | • And are classified as being innovative using the alternative (tighter) definition or are classified as IP active | Born Global Firms

Firms have been defined as being ‘born global’ if they...

- Have been established for 5 years or less
- And have been doing business overseas for as long as they have been established

Born Global Firms (Alternative, Tighter Definition)

Firms have been defined as being ‘born global’ under the alternative (tighter) definition if they...

- Have been established for 5 years or less
- And have been doing business overseas for as long as they have been established
- And the proportion of turnover accounted for by overseas sales is over 25%

5. Awareness & Usage

5.1 Awareness & Use of UKTI

All firms were asked whether, prior to the interview, they had heard of either UK Trade & Investment or the commercial services provided by British embassies and consulates overseas. If so, they were also asked whether they had used either of these. The table below provides details of awareness and usage levels, at the total level and by UKTI usage.

Table 5.1.1 Awareness & Use of UKTI – By UKTI Usage

| | Total | UKTI Usage | |--------------------------------|-------|------------| | | | UKTI User | Non-User | | Base | 900 | 189 | 711 | | Aware (at least one) | 70% | 100% | 61% | | - UK Trade & Investment or UKTI| 56% | 91% | 46% | | - Commercial services provided by embassies and consulates overseas | 51% | 90% | 39% | | Used (at least one) | 24% | 100% | 0% | | - UK Trade & Investment or UKTI| 18% | 74% | 0% | | - Commercial services provided by embassies and consulates overseas | 15% | 65% | 0% |

Overall, 70% of internationalising firms had heard of either UKTI or the commercial services provided by overseas posts. Awareness of the UKTI name stands at 56%, with a slightly lower awareness level (51%) recorded for the services provided by overseas posts.

Around a quarter of firms (24%) claim to have used UKTI (including the commercial services provided by overseas posts). This figure may under-represent UKTI usage as the respondent interviewed might not be aware that the firm has accessed UKTI support (e.g. if the firm used UKTI before the respondent joined the firm, or if a different site/department has used UKTI). That said, it is also possible that UKTI users are over-represented in the sample due to the effect of response bias, as the survey was positioned as being on behalf of UKTI so those firms with a prior relationship with the organisation may have been more willing to take part in the research.

UKTI ‘users’ were defined as those that have used either UKTI services or the commercial services provided by British embassies and consulates overseas. It is worth noting that only 91% of UKTI users have actually heard of ‘UK Trade & Investment’ itself, meaning that 9% have used the services provided by overseas posts but not realised the link to UKTI.

Awareness of the UKTI name amongst non-users stands at 46%, although 61% have heard of either UKTI or the services provided by overseas posts. This indicates that there are a significant number of internationalising firms that could benefit from UKTI’s services but have never heard of the organisation. The table below provides details of awareness and usage levels over time. Please note that it is not possible to provide comparable usage data from 2008 due to questionnaire changes, and there is also no data on usage of UKTI and overseas posts specifically from the 2010 survey.

Table 5.1.2 Awareness & Use of UKTI – Over Time

| | Internationalisation Survey | |----------------------|----------------------------| | | 2008 | 2010 | 2011 | 2012 | | **Base** | 900 | 902 | 903 | 900 | | **Aware (at least one)** | | | | | | UK Trade & Investment or UKTI | 68% | 68% | 71% | 70% | | Commercial services provided by embassies and consulates overseas | 51% | 51% | 53% | 56% | | **Used (at least one)** | | | | | | UK Trade & Investment or UKTI | N/A | 27% | 29% | 24% | | Commercial services provided by embassies and consulates overseas | N/A | N/A | 18% | 15% |

Awareness of the UKTI name has risen steadily since 2010 and now stands at 56%, although that is offset by a drop in awareness of posts services over the last year. There also appears to have been a decline in the proportion of firms using UKTI or the commercial services provided by overseas posts, down from 29% in 2011 to 24% currently.

As seen below, both awareness and usage of UKTI increases amongst older firms and those with more employees.

Table 5.1.3 Awareness & Use of UKTI – By Age & Size

| | Age (Years Trading) | Size (Number of Employees) | |----------------------|---------------------|-----------------------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-249 | 250+ | All SMEs | | **Base** | 253 | 255 | 392 | 644 | 192 | 46 | 17 | 882 | | **Aware (at least one)** | | | | | | | | | | UKTI | 60% | 70% | 73% | 66% | 75% | 83% | 94% | 69% | | Posts | 38% | 51% | 55% | 53% | 63% | 64% | 76% | 56% | | **Used (at least one)** | | | | | | | | | | UKTI | 10% | 20% | 29% | 17% | 32% | 50% | 57% | 23% | | Posts | 6% | 12% | 19% | 11% | 20% | 36% | 33% | 15% | As might be expected, the longer a firm has been doing business overseas the more likely they are to have heard of UKTI and to have used their services. That said, around a quarter (24%) of firms that have been doing business overseas for more than 10 years have not heard of UKTI. A broadly similar picture is seen by number of markets, with awareness and usage highest among firms with the most substantial global presence (i.e. active in more than 10 markets).

Table 5.1.4 Awareness & Use of UKTI – By Experience

| Years Exporting | Number of Markets | |-----------------|-------------------| | | Under 2 years | 2-10 years | Over 10 years | 0 | 1-5 | 6-10 | More than 10 | | Base | 200 | 448 | 248 | 68 | 438 | 178 | 211 | | Aware (at least one) | 60% | 69% | 76% | 62% | 66% | 66% | 84% | | - UKTI | 52% | 55% | 59% | 59% | 53% | 49% | 68% | | - Posts | 37% | 48% | 60% | 35% | 44% | 49% | 69% | | Used (at least one) | 16% | 19% | 31% | 19% | 17% | 20% | 39% | | - UKTI | 12% | 15% | 23% | 12% | 13% | 13% | 31% | | - Posts | 9% | 12% | 22% | 12% | 10% | 13% | 29% |

There is a similar correlation between the number of regions firms are doing business in and the likelihood of them being aware of, and using, UKTI. Encouragingly, 62% of firms that are not yet exporting (i.e. not currently doing business in any overseas regions) are still aware of UKTI or the services provided by overseas posts.

Table 5.1.5 Awareness & Use of UKTI – By Number of Regions

| Number of Overseas Regions Active In | None | One | Two | Three | Four | Five | |--------------------------------------|------|-----|-----|-------|------|------| | Base | 68 | 270 | 196 | 151 | 115 | 98 | | Aware (at least one) | 62% | 62% | 73% | 72% | 70% | 88% | | - UKTI | 59% | 47% | 58% | 59% | 56% | 73% | | - Posts | 35% | 42% | 53% | 56% | 52% | 67% | | Used (at least one) | 19% | 15% | 22% | 31% | 30% | 33% | | - UKTI | 12% | 10% | 14% | 28% | 20% | 27% | | - Posts | 12% | 9% | 13% | 19% | 24% | 22% |

There is also clear evidence that innovative and IP active firms are more engaged with UKTI, with both awareness and usage levels higher amongst these groups.

Table 5.1.6 Awareness & Use of UKTI – By Innovation

| Innovative | IP Active | |------------|-----------| | Yes (alternative) | Yes | No | Yes | No | | Base | 402 | 663 | 237 | 193 | 698 | | Aware (at least one) | 76% | 74% | 59% | 86% | 66% | | - UKTI | 61% | 59% | 47% | 73% | 52% | | - Posts | 57% | 55% | 39% | 63% | 47% | | Used (at least one) | 29% | 27% | 15% | 40% | 19% | | - UKTI | 23% | 20% | 9% | 32% | 13% | | - Posts | 20% | 17% | 10% | 22% | 14% | As seen below, awareness and usage of UKTI is highest among firms that plan to grow over the next 5 years (and particularly those expecting 'substantial' growth), which is encouraging given that this group are most likely to need assistance to achieve their growth ambitions. Awareness peaks amongst innovative high-growth firms (81%), which is encouraging given that this is a key group for UKTI.

Table 5.1.7 Awareness & Use of UKTI – By Innovation & Growth

| Growth Objectives | Innovation & Growth | Non innovative | |-------------------|---------------------|---------------| | Stay same | Mod. growth | Sub. growth | Expect sub. growth | Other | | | Base | 123 | 476 | 272 | 214 | 449 | 237 | | Aware (at least one) | 59% | 70% | 78% | 81% | 71% | 59% | | - UKTI | 44% | 56% | 65% | 67% | 56% | 47% | | - Posts | 45% | 51% | 57% | 59% | 53% | 39% | | Used (at least one) | 16% | 25% | 28% | 30% | 25% | 15% | | - UKTI | 10% | 19% | 21% | 23% | 19% | 9% | | - Posts | 10% | 17% | 17% | 18% | 17% | 10% |

Awareness and usage also tends to increase slightly amongst firms using less 'traditional' or more advanced internationalisation modes (i.e. not just selling direct).

Table 5.1.8 Awareness & Use of UKTI – By Modes Used

| Modes Used | Selling direct | Agents/distributors | Contractual arrangements | Overseas site | |------------|----------------|---------------------|--------------------------|---------------| | Base | 817 | 355 | 135 | 108 | | Aware (at least one) | 71% | 76% | 81% | 82% | | - UKTI | 56% | 65% | 68% | 70% | | - Posts | 52% | 59% | 55% | 61% | | Used (at least one) | 24% | 34% | 36% | 40% | | - UKTI | 18% | 27% | 29% | 33% | | - Posts | 16% | 22% | 18% | 27% | 5.2 Awareness of the Intellectual Property Attaché Network

The UK government has recently established a network of Intellectual Property attachés based in China, India, Brazil and South East Asia, with the aim of strengthening advice and support on intellectual property protection and further developing trade for UK companies in these markets. Firms were asked whether they had heard of the UK Government’s Intellectual Property Attaché network, and results are summarised below.

Chart 5.2.1 Awareness of the Intellectual Property Attaché Network – By UKTI Usage

Overall awareness of this network is relatively low, at 8%, although it rises slightly amongst UKTI users. As might be expected, awareness of the Intellectual Property Attaché Network is highest among IP active firms, at 14%. Innovative firms are also more likely to have heard of the network.

Table 5.2.1 Awareness of Intellectual Property Attaché Network – By Innovation

| | Innovative | IP Active | |----------------|------------|-----------| | | Yes (alternative) | Yes | No | Yes | No | | Base | 402 | 663 | 237 | 193 | 698 | | Yes | 11% | 9% | 6% | 14% | 6% | | No | 89% | 91% | 93% | 86% | 94% | | Don’t know | 0% | 0% | 1% | 0% | 0% |

The network of Intellectual Property attachés are based in China, India, Brazil and South East Asia, but there is no strong evidence that awareness levels are higher amongst firms operating in these areas. Although awareness stands at 12% amongst firms doing business in South/Latin America, compared to an overall awareness figure of 8% for all internationalising firms, this difference is not statistically significant. 9% of firms doing business in Asia Pacific have heard of the network.

Table 5.2.2 Awareness of Intellectual Property Attaché Network – By Overseas Region

| Regions Doing Business In | Europe | North America | South/Latin America | Middle East/Africa | Asia Pacific | |---------------------------|--------|---------------|---------------------|--------------------|--------------| | Base | 759 | 405 | 167 | 349 | 385 | | Yes | 8% | 7% | 12% | 9% | 9% | | No | 92% | 88% | 90% | 91% | 91% | | Don’t know | 0% | 0% | 0% | 0% | 0% |

As seen below, awareness of the Intellectual Property Attaché Network is higher amongst firms that are doing business in China and Brazil, but if in fact lower than average for firms exporting to India (even though this is one of the markets where the attachés operate).

Table 5.2.3 Awareness of Intellectual Property Attaché Network – By Key Markets

| Markets Doing Business In | China | India | Brazil | |---------------------------|-------|-------|--------| | Base | 48 | 72 | 84 | | Yes | 13% | 5% | 14% | | No | 87% | 95% | 86% | | Don’t know | 0% | 0% | 0% | 6. Profile

6.1 Age of Business

The sample for this survey was stratified by age of firm to enable robust analysis to be conducted by 3 different age groups (firms established 0-5 years, 6-10 years and over 10 years). To account for this disproportionate sampling approach, the final data has been weighted back to the true age profile of internationalising firms (using data from the Annual Small Business Survey).

The table below provides details of the actual (unweighted) age distribution of sampled firms, the weighting regime applied, and the weighted proportion of firms in the final sample.

| No. of interviews | % of interviews (unweighted) | True profile of exporters (ASBS data) | Weight applied | % of interviews (Weighted) | |-------------------|-----------------------------|--------------------------------------|----------------|---------------------------| | Not yet trading | 2 | 0% | 17% | 0% | | Within the last 2 years | 86 | 10% | 17% | 6% | | 2-5 years ago | 165 | 18% | 23% | 11% | | 6-10 years ago | 255 | 28% | 23% | 23% | | 11-20 years ago | 176 | 20% | 60% | 27% | | More than 20 years ago | 216 | 24% | 60% | 33% | | Total | 900 | 100% | 100% | 100% |

As detailed above, young firms established in the last 5 years are over-represented in the sample for this survey, accounting for 28% of all interviews compared to 17% of all exporting firms, and as a result have been down-weighted by a factor of 0.60.

The same is true for firms established 6-10 years, although to a lesser extent, with this group being allocated a weight of 0.83. Conversely, older firms are under-represented in the sample and have been up-weighted by a factor of 1.37.

Please note that all results shown in this report have been weighted. The chart below shows the weighted profile of internationalising firms in terms of their age, at both the total level and by UKTI users and non-users.

Chart 6.1.1 When Business Established – By UKTI Usage

Overall, UKTI users have an older profile than non-users, with 44% and 30% respectively established for more than 20 years.

Unsurprisingly, larger firms tend to be older than their smaller counterparts. However, it should be noted that over half of the smallest internationalising firms (with less than 10 employees) have been established for more than 10 years.

Table 6.1.2 When Business Established – By Size of Firm

| Size (Number of Employees) | 0-9 | 10-49 | 50-249 | 250+ | All SMEs | |----------------------------|-----|-------|--------|------|---------| | Base | 644 | 192 | 46 | 17 | 882 | | Not yet trading | 0% | 0% | 0% | 0% | 0% | | Within the last 2 years | 7% | 3% | 2% | 0% | 6% | | 2-5 years ago | 13% | 6% | 5% | 3% | 11% | | 5-10 years ago | 27% | 21% | 4% | 0% | 24% | | 10-20 years ago | 29% | 24% | 27% | 6% | 27% | | More than 20 years ago | 23% | 46% | 61% | 91% | 31% | 6.2 Size of Business (Employees)

The chart below shows the size profile of firms, measured via their number of employees. Analysis has been provided at the total level, and by UKTI users and non-users.

The majority of internationalising firms are relatively small in terms of staff numbers, with two-thirds having less than 10 employees and most of the remainder having less than 50 employees. This reinforces the importance of considering the needs of smaller firms when formulating policy in the area of trade support.

UKTI users tend to be larger than non-users, with 52% and 26% respectively having 10 or more employees. The correlation between age and size of firm is again highlighted in the table below. However, it should be noted that over half of the well-established internationalising firms (i.e. those trading for over 10 years) still have less than 10 employees.

Table 6.2.1 Number of Employees – By Age of Firm

| Age (Years Trading) | Up to 5 | 6-10 | Over 10 | |---------------------|---------|------|---------| | Base | 253 | 255 | 392 | | 0 | 9% | 4% | 2% | | 1-9 | 75% | 74% | 57% | | 10-49 | 13% | 21% | 27% | | 50-99 | 2% | 1% | 4% | | 100-249 | 0% | 0% | 5% | | 250 or more | 0% | 0% | 4% | | Don't know/refused | 0% | 0% | 0% | 6.3 Size of Business (Turnover)

The chart below shows the size profile of firms as measured by their annual turnover. Analysis has been provided at the total level, and by UKTI users and non-users.

Chart 6.3.1 Annual Turnover – By UKTI Usage

Nearly half (45%) of internationalising firms have fairly modest turnovers of no more than £500,000. As was the case with employee numbers, UKTI users tend to be larger, with 34% reporting a turnover in excess of £2million compared to only 17% of non-users. Unsurprisingly, there is a strong relationship between turnover and employee numbers. Overall, 50% of SMEs have annual sales of less than £500,000.

A similar relationship between turnover and age is also evident. However, it is certainly not the case that all older firms have large turnovers, with over a third (36%) of those established more than 10 years reporting a turnover of £500,000 or less, and a slightly lower proportion (29%) reporting a turnover of between £500,000 and £2million.

Table 6.3.1 Annual Turnover - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | All SMEs | |---------------------|-----------------------------|---------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-249 | 250+ | | | Base | 253 | 255 | 392 | 644 | 192 | 46 | 17 | 882 | | Up to £500,000 | 67% | 51% | 36% | 63% | 8% | 2% | 0% | 50% | | £500,000-£2million | 21% | 28% | 29% | 25% | 44% | 6% | 0% | 28% | | £2million-£10million | 6% | 12% | 16% | 4% | 38% | 29% | 6% | 14% | | £10million-£25million | 1% | 0% | 5% | 0% | 4% | 27% | 12% | 3% | | £25million-£500million | 2% | 2% | 6% | 1% | 1% | 26% | 70% | 3% | | More than £500 million | 0% | 0% | 0% | 0% | 0% | 0% | 6% | 0% | | Don't know/refused | 3% | 6% | 8% | 7% | 6% | 10% | 6% | 7% | 6.4 Industry Sector

The chart below shows the profile of firms in terms of their industry sector, both at the total level and by UKTI usage. Please note that the sector classification was taken directly from the sample data (originating from Companies House) rather than being collected during the interview. As detailed earlier (Chapter 4.2), certain sectors were excluded from the sample frame because the proportion of firms within that sector that exported was extremely low, and this is why none of the interviewed firms were in either the primary or construction sectors.

Over two-thirds of internationalising firms are in the service sector. UKTI users are significantly more likely to operate in the production sector (36% vs. 27% of non-users), suggesting that production sector firms may have more need (or appetite) for export-related support. This data is extremely consistent with the main PIMS survey of recent UKTI users, which shows that 35% are in the production sector(^4).

(^4) PIMS 24-27 As seen below older and larger internationalising firms are more likely to be in the production sector.

Table 6.4.1 Industry Sector - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | All SMEs | |---------------------|-----------------------------|----------| | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-249 | 250+ | | | Base | 253 | 255 | 392 | 644 | 192 | 46 | 17 | 882 | | Production | 20% | 29% | 32% | 26% | 34% | 43% | 30% | 29% | | Services | 80% | 71% | 68% | 74% | 66% | 57% | 70% | 71% | 6.5 Ownership

The table below provides an analysis of the ownership of firms in terms of whether they are domestically or foreign owned. Analysis has been provided at the total level, and by UKTI users and non-users.

Chart 6.5.1 Company Ownership – By UKTI Usage

The vast majority of internationalising firms are UK-owned, with just under 1 in 10 under foreign ownership (either wholly or partly). There is some evidence that UKTI users are more likely to be wholly or partly foreign owned (15% vs. 7% of non-users).

As seen below, foreign ownership increases dramatically for larger firms. However, there is little difference by company age in this respect.

Table 6.5.1 Company Ownership - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | All SMEs | |---------------------|-----------------------------|---------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-249 | 250+ | | | Base | 253 | 255 | 392 | 644 | 192 | 46 | 17 | 882 | | UK owned | 92% | 95% | 89% | 95% | 89% | 75% | 43% | 92% | | Foreign owned | 6% | 4% | 9% | 4% | 8% | 22% | 51% | 6% | | Joint UK & foreign owned | 2% | 2% | 2% | 21% | 3% | 2% | 6% | 2% | 7 Innovation & Product/Service Development

7.1 Innovative Firms

Survey data on the extent of firms’ engagement in R&D and new product/service development has been used to categorise them as either ‘innovative’ or ‘non-innovative’. The details of the ‘innovative’ definition, and the alternative tighter definition, are shown below.

| Innovative Firms | |------------------| | Firms have been defined as ‘innovative’ if they… | | • Have more than one employee engaged in R&D activity and more than one employee engaged in new product/service development | | • Or, have commissioned external R&D or new product/service development activity in the last year | | • Or, have introduced new products or services in the last 3 years except firms established in the last 2 years |

Firms have been defined as ‘innovative’ under the alternative, tighter definition if they …

| • Have more than one employee engaged in R&D activity and more than one employee engaged in new product or service development and at least some employees are involved in the development of scientific or technical knowledge not commonly available | | • Or, have commissioned external R&D or new product/service development activity in the last year | | • Or, have introduced new products or services in the last 3 years and these are ‘new to the world’ or ‘new to the sector’ |

The table below shows the proportions of firms classified as ‘innovative’ via each of these definitions. Comparative results have also been provided for from the PIMS surveys.

| Table 7.1.1 Innovative Firms – By UKTI Usage | |---------------------------------------------| | **Total** | **UKTI Usage** | **PIMS Data** | | **Base** | **Total** | **UKTI User** | **Non-User** | **UKTI User** | **Non-User** | | **900** | **189** | **711** | **4419** | **300** | | **Innovative** | **75%** | **84%** | **72%** | **82%** | **63%** | | **Innovative (alternative)** | **46%** | **57%** | **43%** | **62%** | **33%** |

Three-quarters of internationalising firms are classified as being innovative by the main definition, although this falls to 46% when the tighter, alternative definition is employed. UKTI users are significantly more likely to be innovative than non-users, irrespective of which definition is used.

Results are broadly consistent with the PIMS evidence, particularly for users, demonstrating that the Internationalisation survey provides a good representation of UKTI users. It is clear that the following analysis that the larger a firm is (in terms of employee numbers), the more likely it is to be innovative. There is also some evidence that firms established for no more than 5 years are least likely to be engaged in innovation activities.

Table 7.1.2 Innovative Firms - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | All SMEs | |---------------------|-----------------------------|---------| | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-249 | 250+ | 882 | | Base | 253 | 255 | 392 | 644 | 192 | 46 | 17 | 882 | | Innovative | 65% | 80% | 75% | 72% | 76% | 88% | 100%| 74% | | Innovative (alternative) | 36% | 48% | 48% | 42% | 46% | 69% | 94% | 45% | 7.2 IP Active Firms

Firms were asked to indicate whether or not they had applied for or obtained any patents or trademarks, either in the UK or overseas, for any of their products or services. This data has then been used to create a measure of ‘IP active’ firms, as detailed below.

| ‘IP Active’ Firms | |-------------------| | Firms have been defined as ‘IP Active’ if they… | | • Have applied for or obtained any patents, trademarks or other legal protection for their products or services, either in the UK or overseas |

The table below shows the proportions of firms classified as ‘IP active’, as well as details of the specific type of IP protection held, whether it relates to the UK or overseas markets, and whether firms have any triadic patents5.

Table 7.2.1 IP Protection – By UKTI Usage

| | Total | UKTI Usage | |----------------------|-------|------------| | | | UKTI User | Non-User | | **Base** | 900 | 189 | 711 | | **IP Active** | | | | | Yes (IP active) | 22% | 38% | 18% | | No | 76% | 62% | 81% | | Don’t know | 1% | 0% | 1% | | **Type of IP Protection** | | | | | Patents | 9% | 20% | 6% | | Trademarks | 15% | 27% | 11% | | Design Rights | 6% | 10% | 4% | | Other legal protection | 5% | 7% | 5% | | Not IP active | 78% | 62% | 82% | | **Geographical Coverage of IP Protection** | | | | | UK only | 6% | 5% | 6% | | Overseas only | 1% | 0% | 1% | | Both | 16% | 32% | 11% | | Not IP active | 78% | 62% | 82% | | Triadic Patents | 2% | 6% | 1% |

Just over a fifth of internationalising firms (22%) have applied for or obtained some form of legal protection for any of their products or services, and are therefore defined as being IP active. The most common form of IP protection is trademarks, followed by patents. The majority of those with IP protection indicate that this covers both the UK and some overseas markets.

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5 A patent held for the same product or innovation in the USA, Europe and Japan. Reflecting the fact that they are more likely to be defined as innovative, UKTI users are also significantly more likely to be IP active (38% vs. 18% of non-users) and are more likely to hold each type of IP protection. They are also more likely to hold triadic patents (6% vs. 1% of non-users).

As seen below, the larger and older a firm is, the more inclined they are to obtain some form of IP protection.

Table 7.2.2 IP Protection - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | All SMEs | |---------------------|---------------------------|----------| | Up to 5 | 6-10 | Over 10 | | Base | 253 | 255 | 392 | 644 | 192 | 46 | 17 | 882 | | IP Active | | | | | | | | | | Yes (IP active) | 17% | 20% | 25% | 19% | 23% | 44% | 70% | 21% | | No | 81% | 79% | 74% | 81% | 76% | 51% | 30% | 78% | | Don't know | 1% | 0% | 1% | 1% | 1% | 5% | 0% | 1% | | Type of IP Protection| | | | | | | | | | Patents | 6% | 6% | 11% | 7% | 11% | 17% | 27% | 8% | | Trademarks | 10% | 16% | 16% | 12% | 18% | 31% | 22% | 14% | | Design Rights | 5% | 5% | 6% | 5% | 5% | 6% | 24% | 5% | | Other IP protection | 6% | 4% | 6% | 5% | 4% | 5% | 27% | 5% | | Not IP active | 83% | 80% | 75% | 81% | 77% | 56% | 30% | 79% | | Geographical Coverage of IP Protection | | | | | | | | | | UK only | 5% | 8% | 5% | 4% | 7% | 9% | 6% | 6% | | Overseas only | 1% | 2% | 1% | 1% | 0% | 0% | 0% | 1% | | Both | 11% | 11% | 19% | 12% | 16% | 35% | 63% | 15% | | Not IP active | 83% | 80% | 75% | 81% | 77% | 56% | 30% | 79% | | Triadic Patents | 3% | 3% | 3% | 2% | 1% | 7% | 6% | 2% | Firms that operate their own overseas sites and those involved in contractual arrangements overseas (such as licensing, franchising or joint ventures) are most likely to hold IP protection.

Table 7.2.3 IP Protection - By Modes Used

| Modes Used | Selling direct | Agents/distributors | Contractual arrangements | Overseas site | |------------|----------------|---------------------|--------------------------|---------------| | Base | 817 | 355 | 135 | 108 | | IP Active | | | | | | Yes (IP active) | 22% | 32% | 42% | 40% | | No | 77% | 66% | 56% | 57% | | Don’t know | 1% | 1% | 1% | 3% | | Type of IP Protection | | | | | | Patents | 9% | 15% | 21% | 21% | | Trademarks | 15% | 23% | 28% | 30% | | Other IP protection | 5% | 8% | 16% | 13% | | Not IP active | 78% | 68% | 58% | 60% | | Geographical Coverage of IP Protection | | | | | | UK only | 5% | 6% | 7% | 7% | | Overseas only | 1% | 1% | 1% | 2% | | Both | 16% | 25% | 34% | 31% | | Not IP active | 78% | 68% | 58% | 60% | | Triadic Patents | 2% | 4% | 8% | 8% | 7.3 Young, Technology Intensive Firms

Certain firms have been classified as ‘young, technology intensive’, and the details of this definition are shown below.

| ‘Young, Technology Intensive’ Firms | |-------------------------------------| | Firms have been defined as being ‘young, technology intensive’ if they… | | • Have been established for 5 years or less | | • And are classified as being innovative using the alternative (tighter) definition or are classified as IP active |

The table below shows the proportions of firms classified as ‘young, technology intensive’. Analysis has been provided based on all respondents and based just on younger firms.

Table 7.3.1 Young, Technology Intensive Firms – By UKTI Usage

| | All firms | Firms aged up to 5 years | |----------------------|-----------|--------------------------| | | Total | UKTI User | Non-User | Total | UKTI User | Non-User | | Base | 900 | 189 | 711 | 253 | 26 | 227 | | Young tech intensive | 7% | 5% | 8% | 41% | 63% | 38% | | Up to 5 years old but not young tech intensive | 10% | 3% | 12% | 59% | 38% | 62% | | Over 5 years old | 83% | 93% | 80% | - | - | - |

Overall, 7% of all internationalising firms are classified as being ‘young, technology intensive’, which equates to 41% of those established in the last 5 years. Looking at the analysis based on all firms, it appears as if UKTI users are slightly less likely to be ‘young, technology intensive’. However, this is a function of the older age profile of UKTI users, and when the analysis is based solely on firms aged 5 years or less then it becomes clear that UKTI users are in fact more likely to be ‘young, technology intensive’ (63% vs. 38% of non-users).

Amongst firms established in the last 5 years, there are no statistically significant differences in the likelihood of being a ‘young, technology intensive’ firm by number of employees.

Table 7.3.2 Young, Technology Intensive Firms – By Size

| | All firms | Firms aged up to 5 years | |----------------------|-----------|--------------------------| | | Total | 0-9 emps | 10+ emps | Total | 0-9 emps | 10+ emps | | Base | 900 | 644 | 255 | 253 | 213 | 40 | | Young tech intensive | 7% | 8% | 4% | 41% | 40% | 46% | | Up to 5 years old but not young tech intensive | 10% | 13% | 4% | 59% | 60% | 54% | | Over 5 years old | 83% | 79% | 92% | - | 213 | 40 | 7.4 Innovative High Growth Firms

The survey data on innovation activity and growth objectives has been combined in the analysis to identify ‘innovative high growth firms’, as this is a key group for UKTI to target.

The table below provides analysis of the combined innovative and growth data, analysed at the total level and by UKTI usage.

Table 7.4.1 Innovation & Growth Objectives – By UKTI Usage

| | Total | UKTI Usage | |--------------------------------|-------|------------| | | | UKTI User | Non-User | | Base | 900 | 189 | 711 | | Innovative & expect substantial growth | 22% | 28% | 20% | | Innovative & expect moderate growth | 40% | 47% | 39% | | Innovative & expect no growth or negative growth | 12% | 9% | 13% | | Non-innovative | 25% | 16% | 28% |

Overall 22% of internationalising firms are defined as being ‘innovative high growth’, with this rising slightly to 28% amongst UKTI users. However, it should be noted that 20% of those firms that do not use UKTI are still in this critical category, confirming that there are many ‘innovative high growth’ internationalising firms that UKTI are not yet reaching.

As seen below, older firms that have been established for more than 10 years are significantly less likely to be classified as ‘innovative high growth’. However, the proportion does increase amongst larger companies, indicating that firms that have been established for 10 years or less and have 10 or more employees are most likely to be ‘innovative high growth’.

Table 7.4.2 Innovation & Growth Objectives – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | All SMEs | |---------------------|----------------------------|----------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-249 | 250+ | 882 | | Base | 253 | 255 | 392 | 644 | 192 | 46 | 17 | 21% | | Innovative & expect substantial growth | 30% | 28% | 17% | 19% | 26% | 25% | 37% | 21% | | Innovative & expect moderate growth | 30% | 40% | 44% | 37% | 44% | 56% | 57% | 40% | | Innovative & expect no/negative growth | 4% | 13% | 15% | 15% | 6% | 6% | 6% | 13% | | Non-innovative | 35% | 20% | 25% | 28% | 24% | 12% | 0% | 26% | 7.5 Planned Product & Service Development

All firms were asked about their plans for product and service development over the next three years. The chart below shows all respondents’ planned new activities.

Chart 7.5.1 Planned Product & Service Development Activity

- Develop any new products/services: 64%
- Make fundamental changes to existing products/services: 42%
- Make cosmetic changes to existing products/services: 42%
- None of these: 21%

Net: Anticipating any product/service development: 78%

Base: All respondents (Base, Don’t know) (900, 0%)

Over three-quarters (78%) of internationalising firms are planning some form of product or service development over the next 3 years, with most of these expecting to introduce new products or services (often in conjunction with making changes to their existing products/services).

As seen below, UKTI users are significantly more likely to engage in product/service development over the next 3 years, and are also more likely to develop new products/services rather than just modifying existing ones.

Table 7.5.1 Planned Product & Service Development Activity – By UKTI Usage

| | Total | UKTI Usage | |--------------------------|-------|------------| | | | UKTI User | Non-User | | **Base** | 900 | 189 | 711 | | Develop new products/services | 64% | 74% | 61% | | Make fundamental changes or modifications to existing products / services | 42% | 47% | 40% | | Make more cosmetic changes or modifications to existing products / services | 42% | 49% | 40% | | None of these | 21% | 13% | 24% | | Don’t know | 0% | 1% | 0% | | **Net: Anticipating any product/service development activity** | 78% | 87% | 76% | As seen below, firms that simply sell direct to overseas customers are least likely to undertake product or service development activity in the next 3 years. There is also evidence that those operating overseas sites and those doing business overseas through licensing, franchising or other contractual arrangements are most likely to develop new products or services (rather than just modifying existing ones).

Table 7.5.2 Planned Product & Service Development Activity - By Mode

| Modes Used | Selling direct | Agents/distributors | Contractual arrangements | Overseas site | |------------------------------------------------|----------------|---------------------|--------------------------|---------------| | Base | 817 | 355 | 135 | 108 | | Develop new products/services | 64% | 75% | 84% | 80% | | Make fundamental changes or modifications to existing products / services | 41% | 48% | 57% | 48% | | Make more cosmetic changes or modifications to existing products / services | 42% | 55% | 52% | 50% | | None of these | 21% | 13% | 7% | 9% | | Don't know | 0% | 0% | 1% | 2% | | Net: Anticipating any product/service dev’t activity | 78% | 87% | 92% | 89% |

Small firms with less than 10 employees are least likely to be planning new developments or modifications to their products or services, but there is no difference in this respect by age of firm.

Table 7.5.3 Planned Product & Service Development Activity – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-249 | 250+ | All SMEs | |---------------------|---------------------------|---------|------|---------|-----|-------|--------|------|----------| | Base | | 253 | 255 | 392 | 644 | 192 | 46 | 17 | 882 | | Develop new products/services | | 63% | 65% | 64% | 60% | 71% | 77% | 88% | 64% | | Make fundamental changes or modifications to existing products / services | | 43% | 45% | 40% | 39% | 43% | 55% | 61% | 41% | | Make more cosmetic changes or modifications to existing products / services | | 42% | 47% | 41% | 41% | 43% | 49% | 55% | 42% | | None of these | | 21% | 20% | 22% | 24% | 18% | 12% | 0% | 22% | | Don't know | | 0% | 0% | 1% | 0% | 0% | 5% | 0% | 0% | | Net: Anticipating any product/service dev’t activity | | 78% | 80% | 78% | 76% | 82% | 83% | 100% | 78% | As expected, innovative and IP active firms are significantly more likely to conduct product or service development over the next 3 years.

Table 7.5.4 Planned Product & Service Development Activity – By Innovation

| Innovative Activity | Innovative | IP Active | |---------------------|------------|-----------| | | Yes (alternative) | Yes | No | Yes | No | | Base | 402 | 663 | 237 | 193 | 698 | | Develop new products/services | 81% | 75% | 32% | 84% | 58% | | Make fundamental changes or modifications to existing products / services | 54% | 48% | 24% | 50% | 39% | | Make more cosmetic changes or modifications to existing products / services | 51% | 47% | 28% | 60% | 38% | | None of these | 9% | 13% | 46% | 6% | 26% | | Don’t know | 0% | 0% | 1% | 1% | 0% | | Net: Anticipating any product/service dev’t activity | 91% | 87% | 52% | 94% | 74% |

As detailed below, there are strong links between growth and innovation, with the likelihood of undertaking product or service development activity increasing amongst firms with more ambitious growth objectives. This suggests that firms are innovating to help achieve their growth aspirations, both through creating new products/services and by tailoring existing ones to meet market requirements.

Table 7.5.5 Planned Product & Service Development Activity – By Innovation & Growth

| Growth Objectives | Innovation & Growth | |-------------------|---------------------| | | Stay same | Mod. growth | Sub. growth | Expect sub. growth | Other | Non innovative | | Base | 123 | 476 | 272 | 214 | 449 | 237 | | Develop new products/services | 46% | 63% | 81% | 85% | 71% | 32% | | Make fundamental changes or modifications to existing products / services | 30% | 40% | 54% | 56% | 44% | 24% | | Make more cosmetic changes or modifications to existing products / services | 28% | 41% | 57% | 60% | 42% | 28% | | None of these | 35% | 21% | 9% | 6% | 16% | 46% | | Don’t know | 0% | 0% | 1% | 0% | 0% | 1% | | Net: Anticipating any product/service dev’t activity | 65% | 78% | 90% | 94% | 84% | 52% | Analysis has also been provided by whether or not younger firms were ‘born global’ (i.e. have been conducting business overseas since they were established) or are defined as being ‘young, technology intensive’. The definition of ‘young, technology intensive’ firms has already been set out in Chapter 7.3, and for full details of the ‘born global’ classification please refer to Chapter 8.9.

Firms that are defined as ‘born global’ by the alternative, tighter definition are particularly likely to develop new products/services over the next 3 years. The same is true of ‘young technology intensive’ firms, with this group also more likely to plan on modifying their existing products/services.

Table 7.5.6 Planned Product & Service Development Activity – By Born Global & Young, Tech Intensive

| | Up to 5 years old | Over 5 years old | |----------------------|-------------------|------------------| | | Total | Born global | Born global (alternative) | Young, tech intensive | Total | | Base | 253 | 133 | 46 | 103 | 647 | | Develop new products/services | 63% | 62% | 78% | 74% | 64% | | Make fundamental changes or modifications to existing products / services | 43% | 40% | 37% | 52% | 41% | | Make more cosmetic changes or modifications to existing products / services | 42% | 44% | 41% | 50% | 43% | | None of these | 21% | 24% | 15% | 10% | 22% | | Don’t know | 0% | 1% | 0% | 0% | 0% | | Net: Anticipating any product/service dev’t activity | 78% | 75% | 85% | 90% | 78% |

As illustrated below, there is little difference in the product/service development plans of production and service sector firms.

Table 7.5.7 Planned Product & Service Development Activity – By Sector

| | Sector | |----------------------|--------| | | Production | Services | | Base | 249 | 651 | | Develop new products/services | 68% | 63% | | Make fundamental changes or modifications to existing products / services | 42% | 41% | | Make more cosmetic changes or modifications to existing products / services | 42% | 43% | | None of these | 21% | 22% | | Don’t know | 0% | 1% | | Net: Anticipating any product/service development activity | 79% | 78% | 7.6 Geographical Focus of Product & Service Development

As seen in the previous section, 78% of internationalising firms were expecting to undertake some type of product or service development activity over the next 3 years. These firms were asked whether this would be aimed at UK customers or overseas customers. Please note that all analysis in this section is based just on those planning product/service development activity in the next 3 years.

Chart 7.6.1 Geographical Focus of Product/Service Development Activity

As detailed above, the majority of firms that are planning product/service development activity over the next 3 years expect that this will be aimed at both UK and overseas customers (77%).

However, non-users are more likely to focus on the UK market (95% vs. 88% of users) and correspondingly less likely to target product/service development at overseas markets (79% vs. 91% of users).

Table 7.6.1 Geographical Focus of Product/Service Development – By UKTI Usage

| | Total | UKTI Usage | |--------------------------|-------|------------| | | | UKTI User | Non-User | | Base: All anticipating | 705 | 162 | 543 | | product/service dev't | | | | | UK Customers | 16% | 7% | 19% | | Overseas Customers | 5% | 10% | 3% | | Both | 77% | 81% | 76% | | Don't know | 2% | 2% | 2% | | Net: UK customers | 93% | 88% | 95% | | Net: Overseas customers | 82% | 91% | 79% | As seen below, firms using more advanced internationalisation modes are more likely to conduct product/service development for overseas customers than those that simply sell direct, with this particularly true of those operating overseas sites (97%). However, it should be noted that the vast majority of these firms are also planning innovation activity aimed at UK customers.

Table 7.6.2 Geographical Focus of Product/Service Development - By Mode

| Modes Used | Selling direct | Agents/distributors | Contractual arrangements | Overseas site | |------------|----------------|---------------------|--------------------------|---------------| | Base: All anticipating product/service dev’t | 641 | 307 | 125 | 97 | | UK Customers | 15% | 10% | 7% | 3% | | Overseas Customers | 5% | 8% | 7% | 13% | | Both | 78% | 81% | 84% | 84% | | Don’t know | 2% | 1% | 2% | 0% | | Net: UK customers | 93% | 91% | 91% | 87% | | Net: Overseas customers | 83% | 89% | 91% | 97% |

There is some evidence that the larger a firm is, the more likely they are to carry out product/service development activity targeted at overseas customers. However, there are no significant differences in this respect by age of firm.

Table 7.6.3 Geographical Focus of Product/Service Development – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | All SMEs | |---------------------|-----------------------------|----------| | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-249 | 250+ | | | Base: All anticipating product/service dev’t | 198 | 203 | 304 | 489 | 160 | 39 | 17 | 688 | | UK Customers | 12% | 18% | 16% | 17% | 13% | 12% | 6% | 16% | | Overseas Customers | 4% | 1% | 7% | 4% | 9% | 0% | 6% | 5% | | Both | 81% | 79% | 76% | 75% | 78% | 88% | 88% | 77% | | Don’t know | 3% | 2% | 2% | 3% | 0% | 0% | 0% | 2% | | Net: UK customers | 93% | 97% | 91% | 93% | 91% | 100% | 94% | 93% | | Net: Overseas customers | 85% | 80% | 83% | 80% | 87% | 88% | 94% | 82% | Amongst those firms planning product/service development activity over the next 3 years, innovative and IP active firms are more likely to be doing this for overseas customers. Similar proportions of firms are expecting to carry out product/service development aimed at UK customers, irrespective of their innovation levels (although as seen earlier, innovative firms were much more likely to be planning any product/service development at all).

Table 7.6.4 Geographical Focus of Product/Service Development – By Innovation

| | Innovative | IP Active | |----------------------|------------|-----------| | | Yes (alternative) | Yes | No | Yes | No | | Base: All anticipating product/service dev't | 365 | 573 | 132 | 181 | 517 | | UK Customers | 10% | 15% | 21% | 9% | 18% | | Overseas Customers | 5% | 5% | 6% | 6% | 5% | | Both | 82% | 78% | 72% | 82% | 75% | | Don't know | 2% | 2% | 1% | 3% | 2% | | Net: UK customers | 92% | 93% | 93% | 91% | 94% | | Net: Overseas customers | 87% | 83% | 78% | 88% | 80% |

As detailed below, there is little difference in the geographical focus of product/service development activity by the extent of firms’ growth ambitions.

Table 7.6.5 Geographical Focus of Product/Service Development – By Innovation & Growth

| | Growth Objectives | Innovation & Growth | |----------------------|-------------------|---------------------| | | Stay same | Mod. growth | Sub. growth | Expect sub. growth | Other | Non innovative | | Base: All anticipating product/service dev't | 78 | 368 | 246 | 201 | 372 | 132 | | UK Customers | 19% | 16% | 14% | 14% | 15% | 21% | | Overseas Customers | 5% | 5% | 6% | 4% | 5% | 6% | | Both | 75% | 77% | 77% | 79% | 78% | 72% | | Don't know | 1% | 2% | 2% | 3% | 2% | 1% | | Net: UK customers | 94% | 93% | 91% | 93% | 93% | 93% | | Net: Overseas customers | 80% | 82% | 83% | 83% | 83% | 78% | Firms that are defined as ‘born global’ by the alternative, tighter definition are most likely to be targeting their innovation activity at overseas customers.

Table 7.6.6 Geographical Focus of Product/Service Development – By Born Global & Young, Tech Intensive

| | Up to 5 years old | Over 5 years old | |----------------------|-------------------|------------------| | | Total | Born global | Born global (alternative) | Young, tech intensive | | Base: All anticipating product/service dev’t | 198 | 100 | 39 | 93 | 507 | | UK Customers | 12% | 9% | 5% | 6% | 16% | | Overseas Customers | 4% | 6% | 15% | 1% | 5% | | Both | 81% | 81% | 79% | 88% | 77% | | Don’t know | 3% | 4% | 0% | 4% | 2% | | Net: UK customers | 93% | 90% | 85% | 95% | 93% | | Net: Overseas customers | 85% | 87% | 95% | 89% | 82% |

As detailed below, there is little difference in this respect by sector.

Table 7.6.7 Geographical Focus of Product/Service Development – By Sector

| | Sector | |----------------------|--------| | | Production | Services | | Base: All anticipating product/service dev’t | 198 | 507 | | UK Customers | 15% | 16% | | Overseas Customers | 7% | 4% | | Both | 76% | 78% | | Don’t know | 2% | 2% | | Net: UK customers | 91% | 94% | | Net: Overseas customers | 83% | 82% | 7.7 Key Markets Driving Innovation

Those firms that expected to undertake product or service development activity over the next 3 years were asked if there were any specific countries which were more important than others in terms of being a stimulus for their innovation and product or service development. Please note that individual markets mentioned by more than 3% of firms have been shown in the analysis below.

Table 7.7.1 Key Markets Driving Innovation - By UKTI Usage

| Base: All anticipating product/service dev't | Total | UKTI Usage | |--------------------------------------------|-------|------------| | | | User | Non-User | | Yes | 705 | 162 | 543 | | - USA | 18% | 22% | 16% | | - Germany | 11% | 16% | 10% | | - UK | 11% | 12% | 11% | | - China | 9% | 14% | 8% | | - France | 8% | 6% | 8% | | - India | 5% | 6% | 4% | | - Spain | 4% | 3% | 5% | | - Australia | 4% | 8% | 3% | | - Netherlands | 4% | 6% | 3% | | - UAE | 4% | 7% | 3% | | No | 46% | 32% | 51% | | Don’t know | 2% | 2% | 2% |

Just over half of firms (52%) felt that certain markets were more critical than others in terms of being a stimulus for their innovation activity, with this more likely to be the case amongst UKTI users (66%).

The most widely identified market in this respect was the USA (18%), with Germany and China highlighted by around 1 in 10 firms. It is also interesting to note that although this survey was amongst internationalising firms, a significant proportion of these (11%) indicated that the UK was a key driver of their innovation activity. The table below provides similar analysis, but by firms’ growth objectives over the next 5 years.

Table 7.7.2 Key Markets Driving Innovation - By Growth Objectives

| Growth Objectives | Stay the same size | Moderate growth | Substantial growth | |-------------------|--------------------|-----------------|--------------------| | Base: All anticipating product/service dev't | 78 | 368 | 246 | | Yes | 42% | 49% | 63% | | - USA | 19% | 15% | 22% | | - Germany | 7% | 11% | 15% | | - UK | 5% | 12% | 13% | | - China | 6% | 9% | 10% | | - France | 6% | 5% | 13% | | - India | 4% | 5% | 4% | | - Spain | 2% | 4% | 6% | | - Australia | 2% | 4% | 7% | | - Netherlands | 5% | 3% | 5% | | - UAE | 0% | 3% | 7% | | No | 53% | 50% | 36% | | Don't know | 5% | 2% | 1% | 8. Overseas Activity & Experience

8.1 Modes Used

Firms were asked which of a list of overseas business activities they had been involved in over the last five years. Those not involved in any of these overseas activities were asked whether they were seriously considering starting to conduct overseas business via any of these routes in the next year, and only those responding positively to this question were invited to take part in the research. This group were asked to indicate which types of activities they were planning to become involved in.

The chart below shows usage (and plans for those not yet exporting) of these overseas business activities.

Chart 8.1.1 Modes of Internationalisation Used in Last 5 Years (Or planning in next year for those not yet exporting)

- Selling direct: 91%
- Selling through agents or distributors: 40%
- Licensing, franchising or contractual arrangements: 15%
- Operating overseas site: 12%

Base: All respondents (Base) – (900)

The vast majority of internationalising firms sell direct to businesses or individuals overseas, and two-fifths use agents or distributors. A significant minority also sell overseas through contractual arrangements or operate their own overseas site(s).

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6 Please note that 68 of the 900 firms interviewed (8%) were not yet doing business overseas but were planning to do so in the next year. The table below shows separate analysis of internationalisation modes for firms that are already engaged in overseas business and those that are not yet exporting but planning to start in the next year.

Table 8.1.1 Modes of Internationalisation Used – By Export Status (Or planning in next year for those not yet exporting)

| | Total | Exporting | |----------------------|-------|-----------| | | | Yes | No (planned in next year) | | Base | 900 | 832 | 68 | | Selling direct | 91% | 92% | 83% | | Agents/distributors | 40% | 39% | 58% | | Contractual arrangements | 15% | 14% | 34% | | Overseas site | 12% | 12% | 19% |

As seen above, firms that are not yet exporting but planning to embark on overseas business in the next year are less likely to be focussing on simply selling direct and more inclined to be considering less ‘standard’ modes such as contractual arrangements or setting up their own overseas site. 8.2 Number & Type of Overseas Sites

As seen previously, 12% of firms operated their own overseas sites (or were planning to do so in the next year). These firms were asked to provide details of the main purpose of the site(s).

Chart 8.2.1 Main Purpose of Overseas Sites

| Purpose | Percentage | |----------------------------------------------|------------| | Manufacturing or assembly | 27% | | Call centre | 10% | | Distribution or sales office | 60% | | Service delivery | 55% | | Research, product or process development | 30% |

Base: All with or considering overseas sites (Base, Don't know) – (108, 2%)

Most overseas sites are either distribution/sales offices or service delivery sites. Approaching a third are R&D facilities, and a slightly lower proportion are manufacturing or assembly sites.

The table below provides analysis by age of firm, and indicates that there are no consistent differences in this respect (particularly given the low bases sizes).

Table 8.2.1 Main Purpose of Overseas Sites – By Age

| Purpose | Age (Years Trading) | |----------------------------------------------|---------------------| | | Up to 5 | 6-10 | Over 10 | | Base: All with or considering overseas site(s) | 31 | 26 | 51 | | Manufacturing or assembly | 26% | 12% | 31% | | Call centre | 13% | 4% | 12% | | Distribution or sales office | 61% | 50% | 63% | | Service delivery | 42% | 54% | 59% | | Research, product or process development | 26% | 31% | 31% | | Don’t know | 0% | 4% | 2% | Firms with overseas sites were also asked to indicate how many sites they had, with the following results. Please note that those firms that were not yet exporting have been excluded from the analysis below.

Chart 8.2.2 Number of Overseas Sites

| Number of Sites | Percentage | |-----------------|------------| | One | 39% | | 2-5 | 34% | | 6-10 | 11% | | 11-20 | 4% | | 21-50 | 3% | | Over 50 | 5% |

Base: All with overseas sites (Base, Don’t know) – (94, 3%)

Around two-thirds of those firms with overseas sites have 2 or more of them, and a small minority (8%) operate in excess of 20 sites, suggesting that they are large multi-nationals.

As detailed below, older firms established for more than 10 years tend to have multiple overseas sites, with 66% having more than one.

Table 8.2.2 Number of Overseas Sites – By Age

| Age (Years Trading) | Up to 5 | 6-10 | Over 10 | |---------------------|---------|------|---------| | Base: All with overseas site(s) | 23 | 21 | 50 | | One | 57% | 62% | 30% | | 2-5 | 26% | 19% | 40% | | 6-10 | 9% | 10% | 12% | | 11-20 | 0% | 10% | 4% | | 21-50 | 4% | 0% | 4% | | Over 50 | 4% | 0% | 6% | | Don’t know | 0% | 0% | 4% | Those firms that specifically operated overseas manufacturing sites, call centres or R&D facilities were asked a series of questions to identify the types and locations of the customers they sold to. This was partly to establish whether any of these firms were solely using their overseas sites to produce goods for their UK business or other firms in their group (rather than using them to sell goods or services to overseas customers).

Table 8.2.3 Customer Types of Overseas Manufacturing, Call Centre & R&D Sites

| Base: All with a manufacturing, call centre or R&D site | Total | |--------------------------------------------------------|-------| | Internal customers (i.e. sites / companies affiliated to the firm) | 52% | | External customers in the UK | 52% | | External customers overseas | 79% | | - In the same market as the site | 71% | | - In other overseas markets | 68% | | Don’t know | 8% | | No external overseas sales from overseas site (i.e. only sell to internal customers or external UK customers) | 13% |

Half of these sites serve internal customers within their wider company and a similar proportion provide goods or services to external customers in the UK. However, the majority (79%) also sell to external overseas customers, and can therefore be seen as being part of the firm’s export operations.

A significant minority of these sites (13%) did not make any overseas sales to external customers, but all of the firms involved were also involved in other internationalisation modes (e.g. selling direct) and can therefore be classified as ‘true’ exporters. 8.3 Direct Web Sales

To understand the impact of the web on UK export activity, firms were asked whether they made any overseas sales directly through their websites and, if so, whether they only sold overseas through their website.

As seen above, 29% of internationalising firms make at least some sales through their websites. However, only a small minority (5%) are classified as ‘web only exporters’ on the basis that they do not make sales through any other channels or modes and solely rely on their online operation.

Interestingly, UKTI users are less likely to make any web sales when doing business overseas (24% vs. 31% of non-users), and only 1% of them are ‘web only exporters’. As seen below, the proportion of firms selling overseas through their websites is broadly similar, irrespective of how long they have been doing business overseas. However, less experienced exporters are more likely to be ‘web only exporters’.

Table 8.3.1 Direct Web Sales – By Export Experience

| Overseas Experience | Less than 2 years (exc. not yet exporting) | 2-10 years | More than 10 years | |---------------------|--------------------------------------------|------------|-------------------| | Base | 132 | 448 | 248 | | Any web sales | 30% | 35% | 27% | | - Only sell through website (web only exporters) | 11% | 7% | 2% | | - Sell through website & other channels/modes | 19% | 29% | 25% | | No web sales | 70% | 64% | 73% | | Don’t know | 0% | 0% | 0% |

The table below provides details of the sector profile of ‘web only’ exporters, in comparison to internationalising firms as a whole. As might be expected, firms that do business overseas solely through their website are significantly more likely to be operating in the wholesale and retail sector.

Table 8.3.2 Web Only Exporters – Sector Profile

| Sector Profile | Web only exporters | Not web only | |----------------|--------------------|--------------| | Base | 50 | 850 | | D – Manufacturing | 31% | 29% | | G – Wholesale & retail trade | 37% | 21% | | I – Transport, storage & communication | 8% | 7% | | J – Financial intermediation | 5% | 2% | | K – Real estate, renting & business activities | 17% | 35% | | O – Other community, social & personal service activities | 1% | 6% | 8.4 Importing

Firms were also asked whether they imported any goods or services from overseas, and the chart below summarises these results.

Chart 8.4.1 Proportion Importing Goods or Services in Last 5 Years – By UKTI Usage

Over half of firms have imported in the last 5 years, and there is no statistically significant difference between users and non-users of UKTI in this respect. Please note that firms were not eligible to participate in the research purely on the basis of import activity, and they had to also be involved in one of the outward internationalisation modes to qualify for interview. 8.5 Internationalisation Modes by Firm Profile

This section provides more detailed analysis of the internationalisation modes used by firm characteristic (such as UKTI usage, size, innovation, etc). Please note that those firms not yet exporting are included in this analysis, but the data relates to the modes they are planning to start using in the next year.

As seen below, whilst users and non-users are equally likely to sell direct to customers overseas, the former are more inclined to also use agents or distributors, use contractual arrangements and operate their own overseas sites.

Table 8.5.1 Modes of Internationalisation – By UKTI Usage

| | Total | UKTI Usage | |----------------------|-------|------------| | | Base | UKTI User | Non-User | | Selling direct | 91% | 93% | 91% | | - 'Web only' exporters | 5% | 1% | 6% | | Agents/distributors | 40% | 58% | 35% | | Contractual arrangements | 15% | 23% | 13% | | Overseas site | 12% | 21% | 10% | | - Manufacturing/assembly | 3% | 7% | 2% | | - Call centre | 1% | 3% | 1% | | - Sales/service delivery | 11% | 18% | 8% | | - R&D | 4% | 7% | 3% | | Importing | 57% | 61% | 56% |

Small firms with less than 10 employees are generally less likely to use each of the different modes, and are also less likely to import goods into the UK. However, they are more inclined to only sell overseas through their website (i.e. ‘web only’ exporters). There are less consistent differences by age of firm, although recently established businesses are less likely to use agents/distributors and to import.

Table 8.5.2 Modes of Internationalisation – By Age & Size

| | Age (Years Trading) | Size (Number of Employees) | All SMEs | |----------------------|---------------------|-----------------------------|----------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-249 | 250+ | 882 | | Base | 253 | 255 | 392 | 644 | 192 | 46 | 17 | 882 | | Selling direct | 89% | 91% | 92% | 89% | 95% | 100% | 85% | 91% | | - 'Web only' exporters | 7% | 6% | 4% | 7% | 1% | 0% | 0% | 5% | | Agents/distributors | 34% | 41% | 42% | 35% | 49% | 51% | 73% | 40% | | Contractual arrangements | 14% | 16% | 15% | 13% | 14% | 20% | 57% | 14% | | Overseas site | 12% | 10% | 13% | 8% | 16% | 34% | 39% | 12% | | - Manufacturing/assembly | 3% | 1% | 4% | 1% | 5% | 11% | 15% | 3% | | - Call centre | 2% | 0% | 2% | 0% | 2% | 7% | 12% | 1% | | - Sales/service delivery | 10% | 8% | 11% | 7% | 14% | 29% | 39% | 10% | | - R&D | 3% | 3% | 4% | 2% | 4% | 16% | 15% | 3% | | Importing | 47% | 59% | 59% | 53% | 62% | 74% | 70% | 57% | It might be expected that less experienced exporters would be less likely to use the more ‘advanced’ internationalisation modes. However, as seen in the table below, the proportion selling through contractual arrangements (e.g. licensing, franchising, etc) and operating overseas sites is in fact very similar, irrespective of the length of time firms have been doing business overseas.

The results by number of markets are more in line with what might be expected, with use of agents and distributors, contractual arrangements and overseas sites increasing as firms operate in more markets. The exception to this is those firms operating in no overseas markets (i.e. not yet exporting), but it should be noted that this group were asked about the modes they planned to start using in the next year.

Table 8.5.3 Modes of Internationalisation Used – By Experience

| Years Exporting | Number of Markets | |-----------------|-------------------| | Less than 2 years | 2-10 years | Over 10 years | 0 | 1-5 | 6-10 | More than 10 | | Base | 200 | 448 | 248 | 68 | 438 | 178 | 211 | | Selling direct | 87% | 91% | 93% | 83% | 91% | 90% | 94% | | - ‘Web only’ exporters | 7% | 7% | 2% | 0% | 6% | 5% | 6% | | Agents/distributors | 41% | 39% | 42% | 58% | 26% | 45% | 60% | | Contractual arrangements | 17% | 14% | 15% | 34% | 9% | 15% | 21% | | Overseas site | 13% | 9% | 15% | 19% | 7% | 11% | 21% | | - Manufacturing/assembly | 4% | 2% | 4% | 6% | 1% | 4% | 6% | | - Call centre | 1% | 1% | 2% | 1% | 0% | 0% | 4% | | - Sales/service delivery | 11% | 7% | 14% | 18% | 6% | 9% | 18% | | - R&D | 3% | 2% | 6% | 4% | 1% | 4% | 8% | | Importing | 42% | 57% | 63% | 37% | 50% | 65% | 68% |

It is clear from the analysis below that innovative and IP active firms are more likely to be engaged in the less common internationalisation modes (i.e. agents, contractual arrangements and overseas sites) and are more likely to import.

Table 8.5.4 Modes of Internationalisation – By Innovation

| | Innovative | IP Active | |-----------------|------------|-----------| | | Yes (alternative) | Yes | No | Yes | No | | Base | 402 | 663 | 237 | 193 | 698 | | Selling direct | 91% | 91% | 92% | 91% | 91% | | - ‘Web only’ exporters | 5% | 5% | 5% | 4% | 6% | | Agents/distributors | 47% | 44% | 29% | 58% | 35% | | Contractual arrangements | 23% | 17% | 8% | 28% | 11% | | Overseas site | 18% | 14% | 8% | 22% | 9% | | - Manufacturing/assembly | 5% | 4% | 2% | 8% | 1% | | - Call centre | 2% | 2% | 0% | 4% | 0% | | - Sales/service delivery | 15% | 12% | 6% | 19% | 8% | | - R&D | 5% | 4% | 3% | 9% | 2% | | Importing | 64% | 61% | 45% | 67% | 54% | The analysis below demonstrates that firms that plan to grow over the next 5 years are significantly more likely to use modes other than just selling direct, and this is particularly true of those expecting ‘substantial’ growth.

Table 8.5.5 Modes of Internationalisation – By Innovation & Growth

| Growth Objectives | Innovation & Growth | Non innovative | |-------------------|---------------------|---------------| | | Stay same | Mod. growth | Sub. growth | Expect sub. growth | Other | | Base | 123 | 476 | 272 | 214 | 449 | 237 | | Selling direct | 92% | 90% | 93% | 93% | 90% | 92% | | - ‘Web only’ exporters | 7% | 5% | 5% | 6% | 5% | 5% | | Agents/distributors | 29% | 39% | 49% | 50% | 42% | 29% | | Contractual arrangements | 8% | 15% | 20% | 22% | 16% | 8% | | Overseas site | 5% | 11% | 18% | 18% | 12% | 8% | | - Manufacturing/assembly | 1% | 3% | 5% | 5% | 3% | 2% | | - Call centre | 0% | 1% | 3% | 3% | 1% | 0% | | - Sales/service delivery | 4% | 10% | 15% | 16% | 11% | 6% | | - R&D | 2% | 3% | 5% | 6% | 3% | 3% | | Importing | 48% | 59% | 58% | 59% | 62% | 45% |

As seen below, firms that are classified as ‘born global’ under the alternative, tighter definition are more likely to use agents/distributers and operate their own overseas sites, but appear less likely to be ‘web only exporters’. ‘Young, technology intensive’ firms are more likely than other young firms to do business overseas through contractual arrangements.

Table 8.5.6 Modes of Internationalisation – By Born Global & Young, Tech Intensive

| | Up to 5 years old | Over 5 years old | |-------------------|-------------------|------------------| | | Total | Born global | Born global (alternative) | Young, tech intensive | Total | | Base | 253 | 133 | 46 | 103 | 647 | | Selling direct | 89% | 88% | 87% | 86% | 92% | | - ‘Web only’ exporters | 7% | 5% | 2% | 9% | 5% | | Agents/distributors | 34% | 40% | 59% | 43% | 42% | | Contractual arrangements | 14% | 14% | 17% | 21% | 15% | | Overseas site | 12% | 13% | 22% | 14% | 12% | | - Manufacturing/assembly | 3% | 5% | 13% | 5% | 3% | | - Call centre | 2% | 2% | 4% | 3% | 1% | | - Sales/service delivery | 10% | 11% | 17% | 13% | 11% | | - R&D | 3% | 5% | 9% | 16% | 4% | | Importing | 47% | 57% | 52% | 49% | 59% | 8.6 Number of Modes Used

The chart below provides an analysis of the number of modes firms have been involved in the last five years (or are planning to do in the next year in the case of those firms that are not yet exporting). Please note that this analysis is based just on the ‘outward’ internationalisation modes and does not include importing.

Chart 8.6.1 Number of Modes Used in Last 5 Years – By UKTI Usage (Or planning in next year for those not yet exporting)

Over half of all internationalising firms (58%) are only using a single mode when doing business overseas, although 14% are involved in 3 or 4 different modes.

UKTI users are considerably more likely to employ multiple approaches when doing business overseas, with 62% using more than one mode compared to only 35% of non-users. As seen below, this picture varies considerably across modes. In particular, those involved in some form of contractual arrangement or operating their own overseas site are much more likely to be involved in 3 or 4 different modes, suggesting that firms tend to adopt these approaches later in their international development.

Table 8.6.1 Number of Modes – By Modes Used

| Modes Used | Selling direct | Agents/distributors | Contractual arrangements | Overseas site | |------------|----------------|---------------------|--------------------------|---------------| | Base | 817 | 355 | 135 | 108 | | One | 56% | 12% | 11% | 5% | | Two | 29% | 57% | 23% | 27% | | Three | 10% | 22% | 40% | 36% | | Four | 4% | 9% | 26% | 31% |

There is relatively little difference in this respect by age of firm, although younger businesses established in the last 5 years are slightly more likely to only sell overseas through a single mode (typically selling direct).

Table 8.6.2 Number of Modes – By Age

| Age (Years Trading) | Up to 5 | Up to 5 | Up to 5 | |---------------------|---------|---------|---------| | Base | 253 | 255 | 392 | | One | 63% | 57% | 58% | | Two | 28% | 29% | 28% | | Three | 6% | 11% | 10% | | Four | 3% | 2% | 5% | 8.7 Export Experience

The chart below shows the number of years that firms have been doing business overseas. Analysis has been provided at the total level, and by UKTI users and non-users.

Chart 8.7.1 Number of Year Doing Business Overseas - By UKTI Usage

UKTI users tend to be more experienced overseas, with 51% having been exporting for over 10 years, compared to just 34% of non-user firms. As detailed below, the export experience profile of the Internationalisation Survey sample has remained very consistent over time.

Table 8.7.1 Number of Years Doing Business Overseas – Over Time

| | Total 2010 | Total 2011 | Total 2012 | UKTI Users 2010 | UKTI Users 2011 | UKTI Users 2012 | Non-Users 2010 | Non-Users 2011 | Non-Users 2012 | |------------------|------------|------------|------------|-----------------|-----------------|-----------------|----------------|----------------|----------------| | Base | 902 | 903 | 900 | 235 | 248 | 189 | 667 | 655 | 711 | | Not yet exporting| 4% | 6% | 6% | 3% | 2% | 5% | 4% | 7% | 6% | | Less than 2 years| 12% | 12% | 10% | 8% | 10% | 6% | 13% | 12% | 12% | | 2-5 years | 20% | 17% | 22% | 16% | 13% | 15% | 21% | 19% | 23% | | 6-10 years | 25% | 23% | 24% | 30% | 27% | 22% | 24% | 22% | 25% | | 11-20 years | 20% | 22% | 22% | 20% | 22% | 26% | 21% | 22% | 20% | | More than 20 years| 17% | 20% | 16% | 22% | 25% | 25% | 16% | 18% | 14% | | Don’t know/refused| 2% | 0% | 0% | 1% | 1% | 1% | 2% | 0% | 0% | The following table below shows the 2012 survey data on the length of time firms have been involved in overseas business activity analysed by both size (measured by number of employees) and age.

Table 8.7.2 Number of Years Doing Business Overseas - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | All SMEs | |---------------------|-----------------------------|----------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-249 | 250+ | | | Base | 253 | 255 | 392 | 644 | 192 | 46 | 17 | 882 | | Not yet exporting | 15% | 8% | 3% | 7% | 4% | 0% | 0% | 6% | | Less than 2 years | 40% | 7% | 3% | 12% | 6% | 9% | 0% | 11% | | 2-5 years | 44% | 25% | 14% | 23% | 18% | 19% | 27% | 21% | | 6-10 years | 0% | 60% | 17% | 26% | 25% | 3% | 18% | 24% | | 11-20 years | 0% | 0% | 36% | 21% | 24% | 24% | 6% | 22% | | More than 20 years | 0% | 0% | 27% | 11% | 21% | 44% | 49% | 16% | | Don't know/refused | 0% | 0% | 1% | 0% | 2% | 0% | 0% | 0% |

Aside from the obvious fact that older firms have been doing business overseas for longer, the above analysis suggests when firms do internationalise they often do so reasonably early on. 44% of young firms (established for 5 years or less) have been exporting for 2-5 years, 60% of firms aged 6-10 years have been exporting for 6-10 years, and 63% of firms aged over 10 years have been exporting for more than 10 years.

Similarly, there is a link between size and the length of time firms have been involved in overseas business activity, with smaller firms tending to have been involved in overseas business activity for a shorter period than the larger firms. 8.8 Intermittent Exporters

As an additional indicator of export activity, firms were also asked whether they had made overseas sales every year since they started exporting or whether there had been some years with no overseas sales. Please note that this question was only asked to firms that had been doing business overseas for at least 2 years.

Chart 8.8.1 Whether Made Overseas Sales Every Year Since Starting Exporting – By UKTI Usage

A quarter of internationalising firms are ‘intermittent’ exporters, in the sense that they have not consistently made overseas sales since they started exporting. Whilst this is less likely to be the case amongst users of UKTI, a significant minority have still dipped in and out of overseas business. As seen below, the smaller the firm the more likely they are to be an intermittent exporter. Interestingly, the same is true of older firms although this may be down to the fact that they tend to have been exporting for longer and hence have had a greater chance of experiencing a year without any overseas sales.

Table 8.8.1 Whether Made Overseas Sales Every Year Since Starting Exporting - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | All SMEs | |---------------------|---------------------------|---------| | Up to 5 | 6-10 | Over 10 | | Base: All exporting 2 years or more | 113 | 217 | 370 | | Some years with no overseas sales | 20% | 22% | 27% | | Overseas sales every year | 80% | 77% | 72% | | Don't know | 0% | 0% | 1% |

Unsurprisingly, firms that are active in fewer markets are more likely to have experienced interruptions to their overseas business. It might be expected that ‘web only’ exporters are more likely to be intermittent exporters due to the less engaged nature of their overseas business, but there is no evidence that this is the case.

Table 8.8.2 Whether Made Overseas Sales Every Year Since Starting Exporting - By Number of Markets & Web Only Exporters

| Number of Markets | 'Web only' exporters | |-------------------|-----------------------| | Base: All exporting 2 years or more | Up to 5 | 6-10 | Over 10 | Yes | No | | Some years with no overseas sales | 39% | 18% | 9% | 27% | 25% | | Overseas sales every year | 60% | 81% | 91% | 73% | 74% | | Don't know | 0% | 1% | 0% | 0% | 1% | The table below compares the profile of intermittent exporters with that of internationalising firms as a whole, ‘continual’ exporters (i.e. firms that have had overseas sales every year since they started exporting) and firms that have yet to start doing business overseas. Please note that the data on ‘continual’ exporters excludes firms that have been doing business overseas for less than 2 years to allow accurate comparisons to be made with intermittent exporters.

Table 8.8.3 Intermittent Exporters – Profile Comparison

| Profile | Total (all firms) | Intermittent exporters | Continual exporters | Not yet exporting | |--------------------------------|-------------------|------------------------|---------------------|-------------------| | | | | Exports as % of turnover | | | | | | 1-10% | 11-50% | 51%+ | | | **Base** | 900 | 171 | 526 | 224 | 160 | 125 | 68 | | **Age** | | | | | | 0-5 years | 17% | 7% | 10% | 11% | 9% | 9% | 43% | | 6-10 years | 23% | 21% | 25% | 24% | 26% | 25% | 31% | | Over 10 years | 60% | 72% | 66% | 65% | 65% | 66% | 26% | | **Size** | | | | | | 0-9 employees | 68% | 78% | 61% | 64% | 61% | 58% | 84% | | 10-249 employees | 30% | 21% | 35% | 32% | 36% | 38% | 16% | | 250+ employees | 3% | 1% | 4% | 3% | 3% | 4% | 0% | | **Sector** | | | | | | Production | 29% | 26% | 33% | 37% | 32% | 27% | 12% | | Services | 71% | 74% | 67% | 63% | 68% | 73% | 88% | | **Innovation classifications** | | | | | | Innovative | 75% | 72% | 78% | 79% | 81% | 72% | 74% | | Innovative (alt) | 46% | 40% | 50% | 46% | 54% | 53% | 40% | | IP active | 22% | 16% | 26% | 19% | 31% | 32% | 18% | | **Years exporting** | | | | | | 0-2 years | 16% | - | - | - | - | - | 100% | | 2-10 years | 46% | 59% | 52% | 61% | 48% | 45% | - | | Over 10 years | 38% | 40% | 47% | 38% | 51% | 55% | - | | **Overseas sales as % of total turnover** | | | | | | 0-10% | 53% | 63% | 43% | 100% | - | - | 100% | | 11-25% | 15% | 11% | 18% | - | 59% | - | - | | 26-50% | 10% | 7% | 12% | - | 41% | - | - | | Over 50% | 18% | 10% | 24% | - | - | 100% | - | | **Past growth (last 5 years)** | | | | | | Grown substantially | 20% | 11% | 23% | 20% | 24% | 31% | 16% | | Grown moderately | 43% | 42% | 43% | 43% | 45% | 39% | 52% | | Same/smaller | 34% | 47% | 34% | 37% | 31% | 30% | 18% | | Established < 1 yr | 2% | - | - | - | - | - | 12% | | **Future growth (next 5 years)** | | | | | | Grow substantially | 27% | 19% | 25% | 22% | 24% | 32% | 53% | | Grow moderately | 54% | 56% | 56% | 58% | 61% | 45% | 43% | | Same/smaller | 17% | 24% | 17% | 18% | 14% | 18% | 4% | | **Current written business plan** | | | | | | Yes (or in dev’t) | 52% | 47% | 50% | 45% | 53% | 58% | 68% | | No | 46% | 52% | 48% | 54% | 46% | 40% | 28% | | **Management growth strategy** | | | | | | Very clear strategy | 43% | 42% | 44% | 39% | 43% | 56% | 34% | | Fairly clear strategy | 42% | 42% | 42% | 44% | 41% | 39% | 56% | | No clear strategy | 13% | 13% | 13% | 15% | 14% | 5% | 8% | | **Management overseas strategy** | | | | | | Very clear strategy | 29% | 24% | 32% | 20% | 31% | 54% | 20% | | Fairly clear strategy | 32% | 30% | 32% | 25% | 42% | 36% | 34% | | No clear strategy | 37% | 43% | 33% | 52% | 25% | 10% | 42% | The previous table demonstrates that intermittent exporters have a slightly older profile than firms that have recorded overseas sales in every year since they started exporting (i.e. continual exporters), but tend to have fewer employees. They are also less innovative than continual exporters.

As might be expected, overseas sales tend to be less important to intermittent exporters, with 63% indicating that exports account for less than 10% of total turnover (compared to 43% for continual exporters).

Intermittent exporters also display less dynamic growth than firms that have had overseas sales every year; they are significantly less likely to have grown over the last 5 years and to anticipate growth over the next 5 years.

There is no difference in the proportions of intermittent and continual exporters that have a current business plan or have a clear management strategy for achieving their growth objectives (for the business as a whole). However, reflecting the fact that overseas sales account for a lower proportion of their turnover, intermittent exporters are less likely to have a clear management strategy in place for the development of their overseas business (although a quarter still have a ‘very clear’ overseas strategy). 8.9 Proportion of Turnover Accounted for by Overseas Sales

The chart below shows firms’ experience as measured by the proportion of their turnover that is accounted for by overseas sales. Analysis has been provided at the total level, and by UKTI users and non-users.

Consistent with the fact that they have generally been doing business overseas for longer and operate in more markets, users of UKTI also report that a significantly greater proportion of their turnover is accounted for by overseas sales than is the case for non-users. There are few clear differences by age or size of firms in terms of the proportion of turnover accounted for by overseas sales, although firms with 50+ employees are somewhat more likely to indicate that exports contribute more than half of their total turnover. However, it is important to note that a significant minority of young and small firms are also extremely reliant on exports, with 14% of firms established in the last 5 years and 17% of those with less than 10 employees indicating that overseas sales account for more than half of their revenues.

Table 8.9.1 Proportion of Turnover Accounted for by Overseas Sales - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | All SMEs | |---------------------|-----------------------------|---------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-249 | 250+ | | | Base | 253 | 255 | 392 | 644 | 192 | 46 | 17 | 882 | | Zero | 15% | 8% | 3% | 8% | 4% | 2% | 0% | 7% | | Less than 10% | 45% | 45% | 47% | 46% | 48% | 39% | 43% | 46% | | 11%-25% | 10% | 15% | 16% | 14% | 15% | 21% | 12% | 15% | | 26%-50% | 11% | 10% | 10% | 10% | 13% | 2% | 9% | 10% | | 51%-75% | 6% | 8% | 9% | 7% | 9% | 18% | 6% | 8% | | More than 75% | 8% | 10% | 10% | 10% | 9% | 10% | 18% | 10% | | Don't know/refused | 4% | 4% | 5% | 5% | 2% | 7% | 12% | 4% | 8.10 ‘Born Global’ Firms

Certain younger firms have been classified as ‘born global’, based on whether they started doing business overseas from the outset. The details of the ‘born global’ definition, and the alternative tighter definition, are shown below.

| ‘Born Global’ Firms | |---------------------| | Firms have been defined as being ‘born global’ if they… | | • Have been established for 5 years or less | | • And have been doing business overseas for as long as they have been established | | Firms have been defined as being ‘born global’ under the alternative (tighter) definition if they… | | • Have been established for 5 years or less | | • And have been doing business overseas for as long as they have been established | | • And the proportion of turnover accounted for by overseas sales is over 25% |

The table below shows the proportions of firms classified as ‘born global’ via each of these definitions. Analysis has been provided based on all respondents and based just on younger firms.

| Table 8.10.1 Born Global Firms – By UKTI Usage | |-----------------------------------------------| | | All firms | Firms aged up to 5 years | | | Total | UKTI User | Non-User | Total | UKTI User | Non-User | | Base | 900 | 189 | 711 | 253 | 26 | 227 | | Born global | 9% | 3% | 11% | 53% | 46% | 54% | | Born global (alternative) | 3% | 2% | 3% | 18% | 31% | 17% | | Up to 5 years old but not born global | 8% | 4% | 9% | 47% | 54% | 46% | | Over 5 years old | 83% | 93% | 80% | - | - | - |

Overall, 9% of firms are classified as being ‘born global’ under the main definition and 3% under the tighter, alternative definition (equating to 53% and 18% respectively when based just on firms established in the last 5 years).

Using the standard definition, it appears that UKTI users are less likely to be ‘born global’ than non-users (3% and 11% respectively). However, this is largely down to the older profile of UKTI users, with this group containing fewer firms aged 5 years or less. When the analysis is based just on young firms, there is no statistically significant difference in the proportion of users and non-users classified as ‘born global’. There is also no significant difference between users and non-users when it comes to the alternative, tighter ‘born global’ definition. As seen below, amongst firms established in the last 5 years, those with 10 or more employees are more likely to be ‘born global’ by the alternative definition. There are no other statistically significant differences in this regard.

Table 8.10.2 Born Global Firms – By Size

| | All firms | Firms aged up to 5 years | |--------------------------|-----------|--------------------------| | | Total | 0-9 emps | 10+ emps | Total | 0-9 emps | 10+ emps | | Base | 900 | 644 | 255 | 253 | 213 | 40 | | Born global | 9% | 10% | 6% | 53% | 51% | 64% | | Born global (alternative)| 3% | 3% | 3% | 18% | 15% | 40% | | Up to 5 years old but not born global | 8% | 10% | 3% | 47% | 49% | 36% | 8.11 Number of Markets

The chart below shows the number of overseas markets firms have done business in over the last 5 years. Analysis has been provided at the total level, and by UKTI users and non-users.

Chart 8.11.1 Number of Markets Done Business in During Last 5 Years – By UKTI Usage

Approaching half of internationalising firms (46%) have done business in more than five markets over the last five years, with a quarter (26%) indicating that they are active in more than 10.

Users of UKTI clearly have more overseas experience in this respect, with 43% having done business in more than 10 markets compared to only 20% of non-users. As seen below, the number of markets firms operate in tends to increase in line with age and size.

Table 8.11.1 Number of Markets Done Business in During Last 5 Years - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | All SMEs | |---------------------|-----------------------------|----------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-249 | 250+ | | | Base | 253 | 255 | 392 | 644 | 192 | 46 | 17 | 882 | | None | 15% | 8% | 3% | 7% | 4% | 0% | 0% | 6% | | One | 14% | 13% | 10% | 14% | 7% | 5% | 0% | 12% | | 2-5 | 43% | 32% | 36% | 38% | 33% | 19% | 43% | 36% | | 6-10 | 13% | 25% | 21% | 20% | 24% | 14% | 12% | 21% | | More than 10 | 15% | 20% | 31% | 20% | 31% | 61% | 45% | 25% | | Don't know/refused | 0% | 2% | 0% | 1% | 0% | 0% | 0% | 0% | 8.12 Overseas Regions

The chart below shows the geographical regions in which firms have done business over the last 5 years. Analysis has been provided at the total level, and by UKTI users and non-users.

Table 8.12.1 Regions Currently Doing Business In – By UKTI Usage

| Regions | Total | UKTI Usage | | | |--------------------------|-------|------------|----------|----------| | | Base | | UKTI User| Non-User | | Europe | 900 | 189 | 84% | 87% | | North America | 47% | 57% | 43% | | | South & Latin America | 20% | 24% | 18% | | | Middle East & Africa | 41% | 57% | 36% | | | Asia Pacific | 45% | 57% | 41% | | | Not yet exporting | 6% | 5% | 6% | | | Don't know | 0% | 0% | 0% | |

| Number of Regions | Total | UKTI Usage | | | |--------------------------|-------|------------|----------|----------| | None/not exporting | 6% | 5% | 6% | | | One | 30% | 18% | 33% | | | Two | 21% | 20% | 22% | | | Three | 18% | 23% | 16% | | | Four | 14% | 18% | 12% | | | Five | 12% | 16% | 10% | | | Don't know | 0% | 0% | 0% | |

The vast majority of internationalising firms are doing business in Europe, and approaching half are operating in North America, Asia Pacific and the Middle East/Africa. However, only a fifth are active in South or Latin American markets. Almost a third of firms are only doing business in a single region (typically Europe).

With the exception of Europe, UKTI users are more likely to be doing business in each of these broad regions. Linked to this, they tend to be active in a significantly greater number of regions, with 57% operating in 3 or more regions compared to just 39% of non-users. As seen below, the older and larger a firm is the more geographic areas they tend to be operating in.

8.12.2 Regions Currently Doing Business In - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | All SMEs | |---------------------|-----------------------------|----------| | Up to 5 | 6-10 | Over 10 | | Base | 253 | 255 | 392 | 644 | 192 | 46 | 17 | 882 |

| Regions | Europe | North America | South & Latin America | Middle East & Africa | Asia Pacific | Not yet exporting | Don't know | |---------------------|-----------------------------|---------------|-----------------------|----------------------|--------------|-------------------|------------| | | 75% | 36% | 14% | 28% | 34% | 15% | 1% | | | 85% | 47% | 19% | 38% | 41% | 8% | 0% | | | 90% | 49% | 21% | 46% | 50% | 3% | 0% | | | 84% | 44% | 18% | 36% | 42% | 7% | 0% | | | 90% | 47% | 20% | 47% | 47% | 4% | 0% | | | 93% | 71% | 32% | 74% | 63% | 0% | 0% | | | 94% | 63% | 33% | 51% | 46% | 0% | 0% | | | 86% | 46% | 19% | 41% | 45% | 6% | 0% |

| Number of Regions | None/not exporting | One | Two | Three | Four | Five | Don't know | |---------------------|-----------------------------|---------------|------------------------|----------------------|--------------|--------------------|------------| | | 15% | 34% | 22% | 12% | 9% | 8% | 1% | | | 8% | 27% | 24% | 18% | 13% | 10% | 0% | | | 3% | 29% | 20% | 19% | 16% | 14% | 0% | | | 7% | 31% | 23% | 17% | 13% | 9% | 0% | | | 4% | 31% | 18% | 20% | 14% | 13% | 0% | | | 0% | 19% | 12% | 17% | 20% | 18% | 0% | | | 0% | 12% | 37% | 18% | 32% | 21% | 0% | | | 6% | 30% | 21% | 18% | 13% | 12% | 0% |

| | 0% | 0% | 0% | 0% | 0% | 0% | 0% | 8.13 Senior Management Experience

All firms were asked about if there was anyone in the senior management team of their company who had significant experience of doing business overseas before they joined the firm. The chart below shows responses at the total level and separately for users and non-users of UKTI.

UKTI users are significantly more likely to benefit from a senior management team that has brought export experience with them to the firm.

Unsurprisingly, given that they tend to have more partners and directors, larger firms are more likely to have previous overseas experience within their senior management team. However, there is no similar correlation by age of firm and in fact older firms appear less likely to have management with previous export experience.

8.13.1 Senior Management with Previous Overseas Experience - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | All SMEs | |---------------------|---------------------------|---------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-249 | 250+ | | | Base | 253 | 255 | 392 | 644 | 192 | 46 | 17 | 882 | | Yes | 44% | 43% | 36% | 37% | 40% | 59% | 63% | 39% | | No | 56% | 56% | 61% | 63% | 58% | 36% | 30% | 60% | | Don't know | 0% | 1% | 2% | 1% | 2% | 5% | 6% | 1% | 9 Business Growth & Overseas Strategy

9.1 Past Growth

Firms were asked to whether their business had grown, remained the same size or become smaller over the past 5 years, with results summarised below.

Chart 9.1.1 Past Growth (Last 5 Years) – By UKTI Usage

Approaching two-thirds of internationalising firms have grown over the past 5 years, although in most cases this was described as ‘moderate’ growth. Although similar proportions of UKTI users and non-users have grown over this period, the former are significantly more like to have experienced ‘substantial’ growth. Those firms that had grown over the previous 5 years were asked to detail whether this had been in terms of employee numbers, turnover or both.

Most firms reported that their recent growth had involved increasing their turnover, either exclusively or in conjunction with a rise in employee numbers. Only 1% of those firms that said they had grown indicated that this solely related to employee numbers, which might suggest that firms generally focus on financial performance when asked to assess their growth. Older firms that have been trading more than 10 years are least likely to have grown over the past 5 years, and almost a fifth of this group (18%) have in fact become smaller. Micro SMEs (0-9 employees) are also least likely to have grown recently, with 39% either remaining the same size or becoming smaller.

Table 9.1.1 Past Growth (Last 5 Years) - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | All SMEs | |---------------------|-----------------------------|----------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-249 | 250+ | 882 | | Base | 253 | 255 | 392 | 644 | 192 | 46 | 17 | 882 | | Grown substantially | 25% | 30% | 15% | 15% | 28% | 41% | 30% | 20% | | Grown moderately | 44% | 42% | 44% | 43% | 43% | 42% | 45% | 43% | | - Employees only | 2% | 1% | 1% | 1% | 1% | 1% | 0% | 1% | | - Turnover only | 29% | 25% | 22% | 28% | 15% | 18% | 6% | 24% | | - Both | 37% | 44% | 33% | 26% | 55% | 61% | 70% | 35% | | - Neither | 0% | 2% | 3% | 3% | 1% | 2% | 0% | 2% | | Stayed the same | 13% | 18% | 23% | 21% | 22% | 13% | 12% | 21% | | Become smaller | 6% | 9% | 18% | 18% | 5% | 2% | 12% | 14% | | Don't know | 0% | 1% | 0% | 0% | 0% | 0% | 0% | 0% | | Established < 1 year| 11% | 0% | 0% | 2% | 1% | 1% | 0% | 2% | 9.2 Future Growth

All firms were asked their opinions on their future growth, assessing their business as a whole. The chart below shows firms’ growth objectives for the next five years.

Chart 9.2.1 Growth Objectives (Next 5 Years) – By UKTI Usage

Whilst the majority of firms indicated that they expect to grow, most felt that this growth would be ‘moderate’ rather than ‘substantial’. UKTI users are significantly more likely to be planning any growth (89% vs. 78% of non-users), and also more likely to predict ‘substantial’ growth. The table below provides an analysis of the growth objectives of UKTI users and non-users over time. For both groups there has been little change in growth aspirations over the past 3 years.

Table 9.2.1 Growth Objectives (Next 5 Years) – Over Time

| | UKTI Users | Non-Users | |------------------|------------|-----------| | | 2010 | 2011 | 2012 | 2010 | 2011 | 2012 | | Base | 235 | 248 | 189 | 667 | 655 | 711 | | Grow substantially | 31% | 29% | 32% | 23% | 27% | 25% | | Grow moderately | 55% | 58% | 57% | 59% | 52% | 53% | | Stay the same | 10% | 11% | 10% | 14% | 13% | 17% | | Become smaller | 1% | 1% | 0% | 2% | 3% | 3% | | Don’t know | 2% | 2% | 1% | 2% | 4% | 2% |

The following table provides a comparison with the growth expectation data collected in the main PIMS survey (covering UKTI users) and the PIMS Non-User survey.

Table 9.2.2 Growth Objectives (Next 5 Years) – Comparison with PIMS

| | UKTI Users | Non-Users | |------------------|------------|-----------| | | Int Survey 2012 | PIMS 24-27 | Int Survey 2012 | PIMS Non-Users 2012 | | Base | 189 | 4419 | 711 | 300 | | Grow substantially | 32% | 43% | 25% | 26% | | Grow moderately | 57% | 46% | 53% | 51% | | Stay the same | 10% | 6% | 17% | 16% | | Become smaller | 0% | 1% | 3% | 2% | | Don’t know | 1% | 4% | 2% | 4% |

Results for non-users are extremely consistent between the Internationalisation Survey and the PIMS Non-User survey. However, in the case of UKTI users, the PIMS research shows significantly stronger growth aspirations, with 43% planning to grow substantially compared to just 32% in the Internationalisation Survey (although the overall proportion expecting to grow either moderately or substantially is the same). This difference is likely to be linked to the timing of the interviews in relation to when firms received UKTI support. The PIMS survey takes place c.6 months after firms access support, and it is likely that in some cases this support is driving firms’ growth predictions, or that firms are using UKTI at the time they are seeking to grow (to help realise their ambitions). In contrast, in the Internationalisation survey firms are defined as UKTI users if they indicate that they have ever received UKTI support, so this ‘recent support’ impact is less likely to be a factor. Younger firms have significantly more ambitious growth objectives than those established 5 years or more, suggesting that many firms’ growth trajectory hits a plateau after the first few years of trading. Firms with fewer than 10 employees have less dynamic growth projections than larger firms, with around a fifth (19%) simply aiming to remain the same size.

Table 9.2.3 Growth Objectives (Next 5 Years) - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | All SMEs | |---------------------|---------------------------|---------| | Up to 5 | 6-10 | Over 10 | | Base | 253 | 255 | 392 | | Grow substantially | 46% | 31% | 20% | | Grow moderately | 47% | 52% | 57% | | Stay the same | 6% | 14% | 18% | | Become smaller | 0% | 2% | 3% | | Don’t know | 0% | 1% | 3% |

As seen previously, just 2% of companies reported they were planning to downsize over the next five years (and all of these companies were non users). These firms were asked for their reasons.

Table 9.2.4 Reasons for Downsizing - By UKTI Usage

| Reason | Total | UKTI Usage | |---------------------------------------------|-------|------------| | Base: All planning to become smaller | 16 | 0 | 16 | | You can’t see any scope to grow | 42% | - | 42% | | You don’t want to grow and are happy as you are | 51% | - | 51% | | Parent company keeps changing strategy | 7% | - | 7% | 9.3 How Growth Objectives Will Be Achieved

All those planning on either growing or staying the same size over the next 5 years were asked how they would achieve these objectives. The question wording differed for these 2 groups, as follows:

- **If planning to grow:** “Do you expect this growth to mainly come from...?”
- **If planning to stay same size:** “To help maintain your current sales levels, will you be mainly focusing on...?”

Firms were asked separately about how they would achieve their growth objectives in 3 different areas, as follows:

- Markets (new or existing)
- Customers (new or existing)
- Products/services (new or existing)

The table below summarises these results, both at the total level and by the level of firms’ growth objectives.

| Will this mainly be through...? | Total | Growth Objectives | |---------------------------------|-------|-------------------| | | | Stay Same | Moderate Growth | Substantial Growth | | **Base: All planning to grow or stay same** | 871 | 123 | 476 | 272 | | Markets | | | | | | Entering new overseas countries | 5% | 2% | 6% | 6% | | Increasing sales to existing countries | 51% | 65% | 52% | 40% | | Both | 41% | 27% | 39% | 52% | | Don’t know | 3% | 6% | 3% | 2% | | Customers | | | | | | Selling to new customers | 26% | 10% | 28% | 32% | | Increasing sales to existing customers | 17% | 35% | 16% | 10% | | Both | 56% | 53% | 56% | 58% | | Don’t know | 0% | 2% | 0% | 0% | | Products/Services | | | | | | Introducing new products/services | 13% | 6% | 13% | 17% | | Increasing sales of existing products/services | 42% | 47% | 45% | 31% | | Both | 44% | 44% | 41% | 51% | | Don’t know | 1% | 2% | 1% | 2% | | **Summary** | | | | | | New countries | 46% | 30% | 44% | 58% | | Existing countries | 91% | 92% | 91% | 92% | | New Customers | 82% | 63% | 84% | 90% | | Existing customers | 73% | 88% | 72% | 68% | | New products/services | 57% | 51% | 54% | 68% | | Existing products/services | 86% | 92% | 86% | 81% | When it comes to the geographical focus of their growth ambitions, most firms are concentrating on the intensive margins (i.e. existing markets) rather than the external margins (i.e. new markets), with 91% and 46% focussing on each of these areas respectively. However, the proportion expecting to realise their growth objectives though new markets increases amongst those with more ambitious plans, with 58% of firms with ‘substantial’ growth aspirations indicating that they will achieve these by entering new markets (often in conjunction with increasing sales to existing countries).

A similar situation is seen when it comes to products and services, with firms more likely to feel that their growth objectives will be achieved through sales of existing products/services than by developing new ones (86% and 57% respectively). Firms that simply aim to remain the same size over the next 5 years are most likely to be focussing on their existing product range, whereas those intending to grow (particularly substantially) are comparatively more likely to feel that this growth will be at least partly driven by the introduction of new products/services.

However, a different situation is seen when it comes to the customer types that firms will be focussing on, with firms more likely to be targeting new customers than existing ones (82% and 73% respectively). That said, the majority of firms (56%) believe that it will be a combination of (increased) sales to existing customers and the identification of new customers that will help them meet their growth objectives. Again there is a difference between firms that aim to grow and those that are seeking to remain the same size, with the former more likely to be prioritising sales to new customers, and the latter more likely to be focussing on increasing/maintaining sales to existing ones. As seen below, there is very little difference between users and non users in terms of how whether they are focussing on new/existing customers and new/existing products and services. However, UKTI users are significantly more likely to be planning growth through expansion into new countries (55% vs. 43%), although the proportion also focussing on existing markets is the same.

Table 9.3.2 Meeting Growth Objectives - By UKTI usage

| Will this mainly be through...? | Total | UKTI Usage | Non-User | |--------------------------------|-------|------------|----------| | | | UKTI Usage | Non-User | | **Base: All planning to grow or stay same** | 871 | 187 | 684 | | **Markets** | | | | | Entering new overseas countries| 5% | 6% | 5% | | Increasing sales to existing countries | 51% | 43% | 53% | | Both | 41% | 50% | 38% | | Don't know | 3% | 2% | 4% | | **Customers** | | | | | Selling to new customers | 26% | 28% | 26% | | Increasing sales to existing customers | 17% | 17% | 17% | | Both | 56% | 55% | 56% | | Don't know | 0% | 0% | 0% | | **Products/Services** | | | | | Introducing new products/services | 13% | 13% | 13% | | Increasing sales of existing products/services | 42% | 43% | 41% | | Both | 44% | 42% | 45% | | Don't know | 1% | 2% | 1% | | **Summary** | | | | | New countries | 46% | 55% | 43% | | Existing countries | 91% | 92% | 91% | | New Customers | 82% | 83% | 82% | | Existing customers | 73% | 72% | 74% | | New products/services | 57% | 55% | 58% | | Existing products/services | 86% | 85% | 86% | 9.4 Management Strategy for Achieving Growth Objectives

Firms were asked if their Senior Management team had a clear strategy for achieving their growth objectives, with results summarised below.

The vast majority of internationalising firms (85%) believe that their senior management team has a reasonably clear strategy in place for how they will achieve their growth objectives. This is more likely to be the case for UKTI users (91% vs. 83% of non-users), although there is no statistically significant difference when it comes to the proportion having a ‘very clear’ strategy. As seen below, the likelihood of having a clear management strategy for achieving growth increases amongst larger companies. There is also evidence that young firms (established in the last 5 years) are more likely to have a ‘very clear’ growth strategy.

Table 9.4.1 Management Strategy for Achieving Growth Objectives - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Base: All planning to grow or stay same | Yes – very clear | Yes – fairly clear | No | Don’t know | |---------------------|-----------------------------|----------------------------------------|-----------------|-------------------|----|-----------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-249 | 250+ | All SMEs | | | 252 | 247 | 372 | 619 | 190 | 45 | 16 | 854 | | Yes – very clear | 49% | 42% | 42% | 41% | 43% | 51% | 81% | 42% | | Yes – fairly clear | 37% | 40% | 44% | 39% | 49% | 48% | 19% | 42% | | No | 10% | 15% | 13% | 16% | 8% | 1% | 0% | 13% | | Don’t know | 4% | 3% | 1% | 3% | 0% | 0% | 0% | 2% |

Firms with ‘substantial’ growth objectives are more likely to indicate that the senior management team has a very clear strategy for achieving these. Unsurprisingly, there is also a clear link between firms having a formal business plan and the management team having a clear growth strategy. That said, a third of those without a written business plan claim to have a very clear growth strategy, indicating that a significant proportion of businesses have concrete plans in place but choose not to formally document them.

Table 9.4.2 Management Strategy for Achieving Growth Objectives - By Growth Objectives & Business Planning

| Growth Objectives | Current Business Plan | |-------------------|-----------------------| | Stay same | Moderate growth | Substantial growth | | Base: All planning to grow or stay same | Yes | No | | 123 | 476 | 272 | 471 | 385 | | Yes – very clear | 42% | 37% | 57% | 53% | 33% | | Yes – fairly clear| 38% | 46% | 35% | 39% | 44% | | No | 19% | 15% | 6% | 5% | 22% | | Don’t know | 1% | 2% | 3% | 3% | 1% | 9.5 Management Strategy for Developing Overseas Business

Firms were further asked if their senior management team had a clear strategy for developing their overseas business, with results summarised below.

Chart 9.5.1 Management Strategy for Developing Overseas Business – By UKTI Usage

Overall the majority of firms report that their senior management team has at least a fairly clear strategy for the development of their overseas business (61%), with this proportion increasing amongst users of UKTI (75%). As seen below, larger companies are significantly more likely to have clear strategies in place for developing their overseas business. However, there is no difference in this respect by age of firm.

Table 9.5.1 Management Strategy for Developing Overseas Business

- By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Base | 6-10 | Over 10 | 0-9 | 10-49 | 50-249 | 250+ | All SMEs | |---------------------|---------------------------|------|------|---------|-----|-------|--------|------|---------| | Up to 5 | | 253 | 255 | 392 | 644 | 192 | 46 | 17 | 882 | | 6-10 | | | | | | | | | | | Over 10 | | | | | | | | | | | 0-9 | | | | | | | | | | | 10-49 | | | | | | | | | | | 50-249 | | | | | | | | | | | 250+ | | | | | | | | | | | All SMEs | | | | | | | | | |

As detailed in the table below, the more ambitious a firm’s growth objectives, the more likely they are to indicate that the senior management has a very clear strategy for developing their overseas business, suggesting that overseas sales are fundamental to meeting these growth aspirations. However, it is still the case that 27% of those aiming to grow substantially do not have a clear overseas strategy.

The majority of firms with a current business plan (72%) have a reasonably clear overseas strategy in place. However, the fact that a fifth of those without a written business plan still have a ‘very clear’ overseas strategy demonstrates that significant numbers of firms that do not have formal, documented plans are still thinking and planning strategically.

Table 9.5.2 Management Strategy for Developing Overseas Business

- By Growth Objectives & Business Planning

| Growth Objectives | Current Business Plan | |-------------------|-----------------------| | Stay same | Moderate growth | Substantial growth | | Base | 123 | 476 | 272 | 482 | 401 | | Yes – very clear | 24% | 26% | 38% | 37% | 20% | | Yes – fairly clear| 26% | 33% | 35% | 35% | 28% | | No | 46% | 39% | 27% | 26% | 50% | | Not aiming to develop overseas business | 3% | 1% | 0% | 2% | 2% | | Don’t know | 0% | 1% | 0% | 0% | 1% | 9.6 Business Planning

Firms were asked to indicate whether or not they had a current, written business plan, with the following results.

Chart 9.6.1 Whether Have Current, Written Business Plan – By UKTI Usage

UKTI users appear to be more strategic in their approach than non-users, with two thirds having a current written business plan (or in the process of preparing one) compared to just under half of non-users.

As seen below, there is some evidence that the proportion of firms with a formal business plan has declined over the last year, particularly amongst non-users of UKTI support.

Table 9.6.1 Whether Have Current, Written Business Plan – Over Time

| | Total | UKTI Users | Non-Users | |----------------|--------|------------|-----------| | | 2008 | 2010 | 2011 | 2012 | 2008 | 2010 | 2011 | 2012 | 2008 | 2010 | 2011 | 2012 | | Base | 900 | 902 | 903 | 900 | 311 | 235 | 248 | 189 | 589 | 667 | 655 | 711 | | Yes | 61% | 57% | 59% | 49% | 68% | 68% | 74% | 64% | 58% | 53% | 52% | 45% | | In progress | - | - | - | - | - | - | - | - | - | - | - | - | | No | 33% | 38% | 38% | 46% | 30% | 27% | 25% | 32% | 35% | 42% | 43% | 50% | | Don't know | 5% | 5% | 3% | 2% | 2% | 5% | 2% | 1% | 7% | 5% | 4% | 2% | As seen below, recently established firms are most likely to have a current business plan, potentially because they needed to create one when setting up the company (e.g. to access funding, etc). It is also the case that the larger the firm, the more likely it is to have a formal plan in place.

Table 9.6.2 Whether Have Current, Written Business Plan - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Base | 6-10 | Over 10 | 0-9 | 10-49 | 50-249 | 250+ | All SMEs | |---------------------|-----------------------------|------|------|---------|-----|-------|--------|------|---------| | Up to 5 | | 253 | 255 | 392 | 644 | 192 | 46 | 17 | 882 | | 6-10 | | 63% | 45% | 47% | 42% | 58% | 78% | 94% | 48% | | Over 10 | | 2% | 3% | 2% | 3% | 1% | 0% | 0% | 2% | | 0-9 | | 34% | 49% | 48% | 53% | 39% | 13% | 6% | 47% | | 10-49 | | 1% | 2% | 2% | 1% | 2% | 9% | 0% | 2% | | 50-249 | | 64% | 49% | 48% | 53% | 39% | 13% | 6% | 47% | | 250+ | | 2% | 2% | 2% | 1% | 2% | 9% | 0% | 2% | | All SMEs | | 882 | 882 | 882 | 882 | 882 | 882 | 882 | 882 |

Firms with more ambitious growth objectives appear to be more strategic in the sense that they are more likely to have a current written business plan.

Table 9.6.3 Whether Have Current, Written Business Plan - By Growth Objectives

| Growth Objectives | Stay same | Moderate growth | Substantial growth | |-------------------|-----------|-----------------|--------------------| | Base | 123 | 476 | 272 | | Yes | 33% | 47% | 65% | | In progress | 1% | 2% | 4% | | No | 64% | 49% | 30% | | Don't know | 2% | 2% | 0% | 9.7 Expected Overseas Growth

9.7.1 Number of Markets

Firms were asked whether they expected the number of markets they were doing business in to increase, decrease or stay the same over the next 3 years.

Chart 9.7.1.1 Anticipated Change in Number of Markets (Next 3 Years) – By UKTI Usage

Almost half of internationalising firms expect to expand into more markets over the next 3 years, with only a very small minority (4%) anticipating a decline in this respect.

There is no statistically significant difference between the proportion of UKTI users and non-users that intend to increase the number of overseas markets they operate in over the next 3 years. As detailed below, there is some evidence that firms are less optimistic in terms of their overseas expansion than was the case in previous years, with only 48% of 2012 respondents expecting to increase the number of markets they operate in, compared to 53% in 2011. Interestingly, this downward shift in expectations is almost entirely down to UKTI users, where the proportion has fallen from 64% to 52%.

Table 9.7.1.1 Anticipated Change in Number of Markets (Next 3 Years) – Over Time

| | Total 2010 | Total 2011 | Total 2012 | UKTI Users 2010 | UKTI Users 2011 | UKTI Users 2012 | Non-Users 2010 | Non-Users 2011 | Non-Users 2012 | |------------------|------------|------------|------------|-----------------|-----------------|-----------------|----------------|----------------|----------------| | Base | 902 | 903 | 900 | 235 | 248 | 189 | 667 | 655 | 711 | | Increase | 50% | 53% | 48% | 63% | 64% | 52% | 45% | 49% | 47% | | Stay the same | 44% | 40% | 47% | 33% | 31% | 44% | 48% | 44% | 48% | | Decrease | 5% | 3% | 4% | 5% | 2% | 3% | 5% | 4% | 4% | | Don’t know/refused | 2% | 3% | 2% | 0% | 3% | 1% | 2% | 3% | 2% |

Although older firms tend to be active in a greater number of markets, it is younger firms that are more positive in terms of their growth plans, with 72% of firms established in the last 5 years expecting to enter new markets, compared to less than half of older firms. Although less pronounced, there is also some evidence that larger firms are more likely to anticipate an increase in the number of overseas markets they are doing business in.

Table 9.7.1.2 Anticipated Change in Number of Markets (Next 3 Years) - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-249 | 250+ | All SMEs | |---------------------|-----------------------------|---------|------|---------|-----|-------|--------|------|---------| | Base | | 253 | 255 | 392 | 644 | 192 | 46 | 17 | 882 | | Increase | | 72% | 50% | 40% | 47% | 49% | 53% | 57% | 48% | | Stay the same | | 25% | 45% | 54% | 47% | 48% | 39% | 37% | 47% | | Decrease | | 3% | 3% | 5% | 5% | 3% | 7% | 0% | 4% | | Don’t know/refused | | 0% | 2% | 2% | 2% | 2% | 0% | 6% | 1% |

As expected, the more ambitious a firm’s growth plans, the more likely they are to envisage an increase in the number of markets they operate in over the next 3 years.

Table 9.7.1.3 Anticipated Change in Number of Markets (Next 3 Years) - By Growth Objectives

| Growth Objectives | Stay same | Moderate growth | Substantial growth | |-------------------|-----------|-----------------|--------------------| | Base | 123 | 476 | 272 | | Increase | 15% | 49% | 69% | | Stay the same | 76% | 48% | 27% | | Decrease | 9% | 2% | 3% | | Don’t know/refused| 1% | 1% | 1% | 9.7.2 Export Turnover

Firms were also asked whether they expected the proportion of their turnover accounted for by overseas sales to increase, decrease or stay the same over the next 3 years.

Chart 9.7.2.1 Anticipated Change in Proportion of Turnover Accounted for by Overseas Sales (Next 3 Years) – By UKTI Usage

Overall, 47% of firms expect overseas sales to become more important to their business over the next 3 years, with only 7% anticipating that they will account for a lower proportion of turnover than they do currently. This mirrors the results seen for expectations in relation to number of overseas markets, when 48% thought they would increase the number of markets they operate in over the next 3 years and only 4% felt the number would fall.

UKTI users are somewhat more ambitious in their plans for overseas growth, with 53% expecting an increase in the proportion of turnover coming from overseas sales compared to just 44% of non-users. As seen below, younger firms are more positive about the likely increase in their overseas turnover. It is also the case that firms with 50+ employees are more likely than smaller firms to anticipate an increase in this respect.

Table 9.7.2.1 Anticipated Change in Proportion of Turnover Accounted for by Overseas Sales (Next 3 Years) - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | All SMEs | |---------------------|-----------------------------|---------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-249 | 250+ | 882 | | Base | 253 | 255 | 392 | 644 | 192 | 46 | 17 | 882 | | Higher | 62% | 48% | 42% | 46% | 44% | 59% | 63% | 46% | | About the same | 28% | 42% | 47% | 42% | 47% | 36% | 30% | 43% | | Lower | 9% | 7% | 7% | 8% | 7% | 2% | 0% | 7% | | Don't know/refused | 2% | 4% | 2% | 4% | 2% | 2% | 6% | 4% |

The more ambitious a firm’s growth objectives, the more likely it is to anticipate an increase in the proportion of turnover accounted for by overseas sales. This suggests that many growing firms believe that this growth will be driven by their overseas activity rather than the UK market.

Table 9.7.2.2 Anticipated Change in Proportion of Turnover Accounted for by Overseas Sales (Next 3 Years) - By Growth Objectives

| Growth Objectives | Stay same | Moderate growth | Substantial growth | |-------------------|-----------|-----------------|--------------------| | Base | 123 | 476 | 272 | | Higher | 23% | 46% | 63% | | About the same | 61% | 45% | 28% | | Lower | 12% | 5% | 8% | | Don't know/refused| 5% | 4% | 2% | 9.8 Difficulties Accessing Finance

All firms were asked whether they had experienced any difficulties in accessing finance over the past 6 months and, if so, whether this had a negative impact on the scale or scope of their overseas activities.

Chart 9.8.1 Whether Difficulties Accessing Finance in Last 6 Months

Approaching a fifth of all internationalising firms (19%) have experienced difficulties accessing finance in the past 6 months, and in most cases this was felt to have had a negative impact on their overseas business.

As seen below, the number of firms reporting difficulty in accessing finance has fallen back from last year’s significant rise, but is still higher than it was in 2010.

Table 9.8.1 Whether Difficulties Accessing Finance in Last 6 Months – By UKTI Usage & Over Time

| | Total 2010 | Total 2011 | Total 2012 | UKTI Users 2010 | UKTI Users 2011 | UKTI Users 2012 | Non-Users 2010 | Non-Users 2011 | Non-Users 2012 | |------------------|------------|------------|------------|-----------------|-----------------|-----------------|----------------|----------------|----------------| | Base | 902 | 903 | 900 | 235 | 248 | 189 | 667 | 655 | 711 | | Yes | 15% | 25% | 19% | 18% | 28% | 23% | 14% | 24% | 18% | | - Negative impact on overseas activities | 9% | 17% | 13% | 13% | 17% | 17% | 8% | 17% | 11% | | - No impact on overseas activities | 6% | 8% | 6% | 5% | 11% | 6% | 6% | 7% | 6% | | No | 83% | 73% | 80% | 81% | 71% | 75% | 84% | 73% | 81% | | Don’t know / refused | 2% | 3% | 1% | 1% | 248 | 2% | 2% | 3% | 1% | There is now consistent evidence to suggest that UKTI users are more likely to have difficulty accessing finance, although it should be noted that these differences are not statistically significant at an annual level (although they are significant when results are combined across the various survey waves). As seen previously, UKTI users tend to have more ambitious growth objectives, so this difference may be at least partly down to a higher proportion of UKTI users actually attempting to obtain finance.

As seen below, SMEs and firms established in the last 10 years are most likely to encounter problems raising finance.

Table 9.8.2 Whether Difficulties Accessing Finance in Last 6 Months – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | All SMEs | |---------------------|---------------------------|---------| | Up to 5 | 253 | 882 | | 6-10 | 255 | | | Over 10 | 392 | | | 0-9 | 644 | | | 10-49 | 192 | | | 50-249 | 46 | | | 250+ | 17 | | | Base | | | | Yes | 22% | | | - Negative impact on overseas activities | 17% | 15% | 11% | 14% | 12% | 10% | 6% | 13% | | - No impact on overseas activities | 6% | 8% | 5% | 6% | 7% | 6% | 0% | 6% | | No | 76% | | | Don't know/refused | 2% | |

Firms that have been exporting for the least time and those currently in no overseas markets (i.e. not yet exporting) are most likely to experience difficulties obtaining finance, and in the majority of cases this does have a negative impact on their overseas development.

Table 9.8.3 Whether Difficulties Accessing Finance in Last 6 Months – By Experience

| Years Exporting | Number of Markets | |-----------------|-------------------| | < 2 years | 2-10 years | > 10 years | | Base | | 0 | 1-5 | 6-10 | 10+ | | Yes | 27% | 20% | 14% | 37% | 18% | 19% | 17% | | - Negative impact on overseas activities | 19% | 13% | 10% | 26% | 10% | 14% | 13% | | - No impact on overseas activities | 8% | 7% | 4% | 10% | 7% | 5% | 3% | | No | 69% | 79% | 84% | 61% | 81% | 80% | 81% | | Don't know/refused | 3% | 1% | 2% | 3% | 1% | 1% | 2% | There are no significant differences between innovative and non innovative firms in terms of access to finance, nor between those who are IP active and those who are not.

Table 9.8.4 Whether Difficulties Accessing Finance in Last 6 Months – By Innovation

| | Innovative | IP Active | |----------------------|------------|-----------| | | Yes (alternative) | Yes | No | Yes | No | | Base | 402 | 663 | 237 | 193 | 698 | | Yes | 21% | 19% | 18% | 22% | 18% | | - Negative impact on overseas activities | 16% | 13% | 11% | 17% | 12% | | - Negative impact on product/service dev't | 5% | 6% | 7% | 5% | 6% | | No | 77% | 79% | 81% | 77% | 81% | | Don't know/refused | 1% | 2% | 1% | 2% | 1% |

Firms with substantial growth aspirations are most likely to experience difficulties accessing finance, suggesting that this could potentially be a barrier to the realisation of this growth. It is worth noting that 27% of the key group of ‘innovative high growth’ firms have had difficulties raising finance.

Table 9.8.5 Whether Difficulties Accessing Finance in Last 6 Months – By Innovation & Growth

| | Growth Objectives | Innovation & Growth | |----------------------|-------------------|---------------------| | | Stay same | Moderate growth | Substantial growth | Expect substantial growth | Other | Non-innovative | | Base | 123 | 476 | 272 | 214 | 449 | 237 | | Yes | 13% | 17% | 28% | 27% | 16% | 18% | | - Negative impact on overseas activities | 10% | 10% | 21% | 20% | 11% | 11% | | - No impact on overseas activities | 3% | 7% | 7% | 7% | 5% | 7% | | No | 84% | 81% | 71% | 73% | 82% | 81% | | Don't know/refused | 3% | 1% | 1% | 1% | 2% | 1% | 10. Emerging & Fast Growing Markets

10.1 Opportunities in Emerging & Fast Growing Markets

Firms were asked to consider the extent to which they felt that there were opportunities for them in a number of emerging or fast growing markets. For each market, firms were asked to indicate whether they were already doing business there, were very likely to do so in the next 2 years, quite likely to do so or unlikely to do so.

Chart 10.1.1 Opinions on Opportunities in Emerging & Fast Growing Markets

Of these markets, it appears that the UAE represents the best opportunity for internationalising firms, with 21% of firms already doing business there and a further 6% very likely to do so in the next 2 years. This is followed by China and India, with 23% and 22% respectively either already doing business in these markets or very likely to do so.

There is comparatively little enthusiasm for doing business in Mexico, with just 12% of firms already active in this market or very likely to enter it in the next 2 years. To enable more detailed analysis of interest and activity in emerging markets by firm profile, results have been summarised across all 9 of these markets as follows:

### Opportunities In Emerging & Fast Growing Markets - Summary

**Firms have been defined as ‘already in’ if they...**

- Are already in at least one emerging/fast growing market

**Firms have been defined as being ‘very likely’ if they...**

- Are not already in any of the emerging/fast growing markets
- But feel they are ‘very likely’ to do business in at least one in the next 2 years

**Firms have been defined as being ‘quite likely’ if they...**

- Are not already in any of the emerging/fast growing markets
- Do not feel that they are ‘very likely’ to do business in any in the next 2 years
- But feel they are ‘quite likely’ to do business in at least one in next 2 years

**Firms have been defined as ‘unlikely’ if they...**

- Are not already in any of the emerging/fast growing markets

When the data is viewed in this way, it shows that 41% of internationalising firms are already doing business in at least one of these emerging/fast growing markets. A quarter of firms thought it was unlikely that they would enter any of these markets in the next two years.

**Chart 10.1.2 Opportunities in Emerging & Fast Growing Markets (Summary)**

- **Already in**: 41%
- **Very likely**: 12%
- **Quite likely**: 23%
- **Unlikely**: 24%

Base: All respondents (Base, Don’t know) (900, 0%) Over half of UKTI users are already in at least one of these markets and only 14% feel that they are unlikely to enter one in the next 2 years. In contrast, over a quarter (27%) of non-users are not in any emerging/fast growing markets and have no intention of entering any.

Table 10.1.1 Opportunities in Emerging & Fast Growing Markets (Summary) – By UKTI Usage

| | Total | UKTI Usage | | | | |------------------|-------|------------|----------|----------|----------| | | | UKTI User | Non-User | | | | Base | 900 | 189 | 711 | | | | Already in | 41% | 54% | 37% | | | | Very likely | 12% | 11% | 12% | | | | Quite likely | 23% | 21% | 24% | | | | Unlikely | 24% | 14% | 27% | | | | Don’t know | 0% | 1% | 0% | | |

As seen below, there appears to have been a decline in the proportion of firms active in emerging and fast growing markets over the past 2 years, from a high of 48% in 2010 to 41% currently. This pattern is evident for both users and non-users of UKTI.

Table 10.1.2 Opportunities in Emerging & Fast Growing Markets (Summary) – Over Time

| | Total | UKTI Users | | | | | | | | |------------------|-------|------------|----------|----------|----------|----------|----------|----------|----------| | | | 2010 | 2011 | 2012 | 2010 | 2011 | 2012 | 2010 | 2011 | 2012 | | Base | 902 | 903 | 900 | 235 | 248 | 189 | 667 | 655 | 711 | | Already in | 48% | 46% | 41% | 61% | 59% | 54% | 44% | 40% | 37% | | Very likely | 10% | 15% | 12% | 11% | 16% | 11% | 9% | 14% | 12% | | Quite likely | 22% | 19% | 23% | 18% | 14% | 21% | 23% | 21% | 24% | | Unlikely | 19% | 20% | 24% | 10% | 10% | 14% | 22% | 24% | 27% | | Don’t know | 1% | 1% | 0% | 0% | 0% | 1% | 2% | 1% | 0% | The table below provides a more detailed time series analysis by individual market. Please note that in 2010 and 2011 respondents were asked about “UAE or Saudi Arabia” (rather than assessing these markets separately), so as a result the 2012 data for these markets has been combined to allow comparisons to be made over time.

Table 10.1.3 Opportunities in Individual Emerging & Fast Growing Markets – Over Time

| | Russia | Turkey | South Africa | UAE or Saudi Arabia | |----------------|--------|--------|--------------|---------------------| | | 2010 | 2011 | 2012 | 2010 | 2011 | 2012 | 2010 | 2011 | 2012 | | Base | 902 | 903 | 900 | 902 | 903 | 900 | 902 | 903 | 900 | | Already in | 15% | 17% | 13% | 18% | 16% | 16% | 20% | 22% | 14% | | Very likely | 4% | 5% | 4% | 4% | 6% | 4% | 6% | 5% | 5% | | Quite likely | 15% | 14% | 14% | 16% | 18% | 12% | 18% | 18% | 18% | | Unlikely | 64% | 62% | 67% | 59% | 58% | 66% | 54% | 52% | 61% | | Don't know | 2% | 2% | 1% | 2% | 2% | 2% | 2% | 2% | 2% |

There has been a consistent fall in the proportion of firms operating in each of these markets over the past 2 years.

As seen below, older and larger firms are more likely to already be operating in emerging or fast growing markets. However, it is not the case that these markets are only targeted by more established firms, as half of firms in the youngest age band (established up to 5 years) and the smallest size band (0-9 employees) are either already doing business in at least one of these areas or feel that it is ‘very likely’ they will enter one in the next 2 years.

Table 10.1.4 Opportunities in Emerging & Fast Growing Markets (Summary) – By Age & Size

| | Age (Years Trading) | Size (Number of Employees) | |----------------|---------------------|-----------------------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-249 | 250+ | All SMEs | | Base | 253 | 255 | 392 | 644 | 192 | 46 | 17 | 882 | | Already in | 30% | 36% | 46% | 37% | 39% | 73% | 70% | 40% | | Very likely | 23% | 16% | 7% | 12% | 14% | 6% | 12% | 12% | | Quite likely | 26% | 23% | 22% | 25% | 23% | 6% | 6% | 23% | | Unlikely | 21% | 25% | 25% | 26% | 24% | 12% | 12% | 25% | | Don't know | 0% | 0% | 1% | 0% | 1% | 2% | 0% | 0% | The table below provides further analysis by growth objectives and by firms’ attitude to taking risks. For full details of how firms have been classified into each risk segment, please refer to Chapter 11.1 of this report.

Table 10.1.5 Opportunities in Emerging & Fast Growing Markets (Summary) – By Growth Objectives & Attitude to Risk

| Growth Objectives | Attitude to Risk | |-------------------|------------------| | Stay same | Moderate Growth | Substantial Growth | | Base | 123 | 476 | 272 | | Already in | 36% | 41% | 40% | | Very likely | 9% | 8% | 23% | | Quite likely | 18% | 26% | 22% | | Unlikely | 37% | 25% | 15% | | Don’t know | 0% | 1% | 0% |

| Risk Averse | Calculated risks | Risk Taker | |-------------------|------------------|------------| | Base | 108 | 557 | 227 | | Already in | 37% | 39% | 47% | | Very likely | 11% | 11% | 14% | | Quite likely | 16% | 25% | 21% | | Unlikely | 35% | 24% | 17% | | Don’t know | 0% | 0% | 1% |

There is little difference in the proportion of firms already doing business in emerging/fast growing markets by their growth objectives. However, firms planning substantial growth are significantly more likely to claim that it is ‘very likely’ they will enter one or more of these markets in the next 2 years.

In addition, firms with a more aggressive attitude to risk (i.e. ‘risk takers’) are more likely to already be in one or more of these markets. There is less difference between ‘risk averse’ firms and those willing to take ‘calculated risks’, although the former are significantly more likely to rule out emerging markets entirely (35% indicating it is unlikely that they will enter any of these in the next 2 years).

As detailed below, there is clear evidence that firms tend to enter fast growing markets later in their international life-cycle, with those that have been exporting longest significantly more likely to be operating in these markets. Unsurprisingly, the more markets a firm is active in, the more likely they are to be doing business in one of these emerging/fast growing markets.

Table 10.1.6 Opportunities in Emerging & Fast Growing Markets (Summary) – By Experience

| Years Exporting | Number of Overseas Markets | |-----------------|---------------------------| | Less than 2 years | 2-10 years | Over 10 years | None | 1-5 | 6-10 | More than 10 | | Base | 200 | 448 | 248 | 68 | 438 | 178 | 211 | | Already in | 16% | 39% | 54% | 0% | 20% | 51% | 80% | | Very likely | 22% | 12% | 7% | 33% | 11% | 12% | 8% | | Quite likely | 31% | 21% | 22% | 33% | 30% | 22% | 9% | | Unlikely | 30% | 29% | 17% | 34% | 39% | 15% | 2% | | Don’t know | 0% | 0% | 1% | 0% | 0% | 1% | 1% | Similarly, the more overseas regions a firm is active in, the more likely they are to be doing business in any of the emerging or fast growing markets.

Table 10.1.7 Opportunities in Emerging & Fast Growing Markets (Summary) – By Number of Regions

| Number of Overseas Regions Active In | None | One | Two | Three | Four | Five | |-------------------------------------|------|-----|-----|-------|------|------| | Base | 68 | 270 | 196 | 151 | 115 | 98 | | Already in | 0% | 15% | 31% | 52% | 75% | 87% | | Very likely | 33% | 8% | 11% | 14% | 13% | 8% | | Quite likely | 33% | 24% | 37% | 25% | 9% | 3% | | Unlikely | 34% | 53% | 21% | 9% | 3% | 1% | | Don't know | 0% | 0% | 0% | 1% | 0% | 1% |

There is some evidence that emerging or fast growing markets are more attractive to innovative and IP active firms. However, even amongst non-innovative firms, nearly half are either already in one of these markets or believe they are ‘very likely’ to enter one in the next 2 years.

Table 10.1.8 Opportunities in Emerging & Fast Growing Markets (Summary) – By Innovation

| Innovative | Yes (alternative) | Yes | No | Yes | No | |------------|-------------------|-----|----|-----|----| | Base | 402 | 663 | 237| 193 | 698| | Already in | 46% | 43% | 33%| 60% | 35%| | Very likely| 10% | 11% | 14%| 12% | 12%| | Quite likely| 24% | 24% | 21%| 16% | 25%| | Unlikely | 18% | 21% | 32%| 12% | 28%| | Don't know | 1% | 0% | 0% | 0% | 0% |

As might be expected, ‘born global’ firms (particularly via the alternative, tighter definition) are more likely to be in these markets than other young firms that internationalised at some point after they were established.

Table 10.1.9 Opportunities in Emerging & Fast Growing Markets (Summary) – By Born Global & Young, Tech Intensive

| Up to 5 years old | Total | Born global | Born global (alternative) | Young, tech intensive | Over 5 years old | |-------------------|-------|-------------|---------------------------|----------------------|------------------| | Base | 253 | 133 | 46 | 103 | 647 | | Already in | 30% | 41% | 65% | 32% | 43% | | Very likely | 23% | 19% | 11% | 29% | 9% | | Quite likely | 26% | 23% | 11% | 25% | 22% | | Unlikely | 21% | 17% | 13% | 14% | 25% | | Don't know | 0% | 0% | 0% | 0% | 0% | 10.2 Reasons for Not Doing Business in Emerging & Fast Growing Markets

Every firm that indicated that they were unlikely to do business in one or more of the emerging/fast growing markets was allocated one of these markets at random and asked for their reasons for this. These results have been summarised below (combined across all markets).

Chart 10.2.1 Reasons for Not Considering Emerging & Fast Growing Markets

- Focussing on other countries: 60%
- Little or no demand: 55%
- Too difficult: 37%
- Never thought about it: 34%
- Too risky: 25%
- None of these: 2%

Base: All unlikely to do business in any market (Base, Don't know) (784, 0%)

Most firms not targeting an emerging/high growth market indicate that this is because they are focussing on other markets or there is little/no demand for their products and services there. However, a significant minority highlighted either the perceived difficulties involved or the risks associated with doing business in that market. The table below provides a similar analysis by individual market.

Table 10.2.1 Reasons for Not Considering Emerging & Fast Growing Markets – By Individual Market

| Market | Russia | Turkey | South Africa | UAE | Saudi Arabia | Brazil | Mexico | China | India | |-----------------|--------|--------|--------------|-----|--------------|--------|--------|-------|-------| | Base: All unlikely to enter selected market | 103 | 92 | 95 | 73 | 70 | 95 | 120 | 78 | 58 | | Focussing on other countries | 63% | 64% | 65% | 57% | 45% | 64% | 66% | 50% | 54% | | Little or no demand | 44% | 57% | 57% | 54% | 65% | 52% | 53% | 51% | 66% | | Too difficult | 54% | 31% | 28% | 41% | 38% | 34% | 31% | 37% | 38% | | Never thought about it | 32% | 35% | 35% | 33% | 42% | 35% | 31% | 30% | 39% | | Too risky | 46% | 22% | 16% | 19% | 17% | 21% | 25% | 26% | 25% | | None of these | 4% | 2% | 3% | 0% | 3% | 2% | 0% | 6% | 0% | | Don't know | 0% | 0% | 0% | 0% | 0% | 0% | 1% | 0% | 0% |

With the exception of Russia, the most common reasons for not doing business in each of these markets are that the business is focussing on other, higher priority markets and there being little/no demand for their products or services. However, in the case of Russia, significant numbers of firms are deterred by the perceived difficulty (54%) and risk involved (46%).

As shown below, UKTI users are more likely to decide against emerging/fast growing markets because they are focussing on other countries, whereas non-users are more likely to believe there is little or no demand for their offering in these markets. There are no significant differences in the proportion of users and non-users avoiding these markets due to the perceived difficulty or risk involved.

Table 10.2.2 Reasons for Not Considering Emerging & Fast Growing Markets

- By UKTI Usage

| Reason | Total | UKTI User | Non-User | |-------------------------------|-------|-----------|----------| | Base: All unlikely to enter selected market | 784 | 160 | 624 | | Focussing on other countries | 60% | 71% | 57% | | Little or no demand | 55% | 48% | 57% | | Too difficult | 37% | 38% | 36% | | Never thought about it | 34% | 30% | 35% | | Too risky | 25% | 22% | 25% | | None of these | 2% | 3% | 2% | | Don't know | 0% | 0% | 0% | There are no major or consistent differences by age of firm, although recently established businesses are slightly more likely to be focussing on other markets in preference to these emerging/fast growing ones. There are also no significant differences by firm size (and the low base size for firms with 50+ employees should be taken into account when interpreting these results).

Table 10.2.3 Reasons for Not Considering Emerging & Fast Growing Markets - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | All SMEs | |---------------------|-----------------------------|---------| | Up to 5 | 223 | 768 | | 6-10 | 235 | | | Over 10 | 326 | | | 0-9 | 572 | | | 10-49 | 167 | | | 50-249 | 29 | | | 250+ | 15 | | | All | 768 | |

| Reason | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-249 | 250+ | All | |-------------------------------|---------|------|---------|-----|-------|--------|------|-----| | Focussing on other countries | 68% | 63% | 56% | 57% | 67% | 66% | 76% | 60% | | Little or no demand | 54% | 57% | 54% | 56% | 51% | 51% | 65% | 54% | | Too difficult | 39% | 40% | 35% | 36% | 43% | 29% | 21% | 37% | | Never thought about it | 39% | 34% | 33% | 35% | 32% | 47% | 21% | 35% | | Too risky | 25% | 24% | 25% | 24% | 28% | 16% | 14% | 25% | | None of these | 2% | 2% | 2% | 2% | 1% | 4% | 0% | 2% | | Don’t know | 0% | 0% | 0% | 0% | 1% | 0% | 0% | 0% |

Those firms with substantial growth objectives are more likely to be focussing their attentions on other markets at this stage, but are also more likely to view these emerging/fast growing markets as risky targets. There are also some differences by firms’ attitude to risk, with risk averse firms more likely to view these markets as too difficult, and those more open to taking risks more inclined to simply be avoiding these markets because they are focussing on other opportunities at the present time.

Table 10.2.4 Reasons for Not Considering Emerging & Fast Growing Markets - By Growth Objectives & Attitude to Risk

| Growth Objectives | Attitude to Risk | |-------------------|------------------| | Stay same | Mod. Growth | Sub. Growth | Risk Averse | Calculated risks | Risk Taker | | Base: All unlikely to enter selected market | 113 | 414 | 232 | 97 | 491 | 189 | | Focussing on other countries | 50% | 58% | 73% | 45% | 60% | 68% | | Little or no demand | 62% | 54% | 54% | 55% | 53% | 59% | | Too difficult | 39% | 35% | 39% | 43% | 38% | 30% | | Never thought about it | 37% | 35% | 34% | 27% | 36% | 34% | | Too risky | 19% | 24% | 29% | 30% | 24% | 24% | | None of these | 1% | 2% | 1% | 5% | 2% | 1% | | Don’t know | 1% | 0% | 0% | 0% | 0% | 0% | 11. Overseas Business Risks

11.1 Attitude to Risk

Firms have been categorised according to their attitude towards taking risks when doing business overseas. They were asked to think about the culture and attitude of their firm and its senior management team and select which one of 3 options best described their mindset to taking risks when doing business overseas.

Chart 11.1.1 Attitude to Risk – By UKTI Usage

As the chart above shows, the majority of firms feel that they are prepared to take calculated risks, but with a significant minority (24%) considering themselves ‘risk takers’. Only 13% believe that it is never worth taking risks and are therefore classified as ‘risk averse.

UKTI users appear to be slightly more inclined to take risks than non-users, although this difference is not statistically significant. Younger companies are significantly more open to taking risks than older firms. However, there are no consistent differences in the attitude to risk by size of firm.

Table 11.1.1 Attitude to Risk – By Age and Size

| Age (Years Trading) | Size (Number of Employees) | All SMEs | |---------------------|-----------------------------|---------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-249 | 250+ | | | Base | 253 | 255 | 392 | 644 | 192 | 46 | 17 | 882 | | Risk Averse | 9% | 11% | 15% | 14% | 11% | 6% | 12% | 13% | | Calculated Risks | 59% | 64% | 63% | 60% | 68% | 70% | 57% | 62% | | Risk Taker | 31% | 25% | 22% | 25% | 21% | 24% | 30% | 24% | | Don't know | 1% | 1% | 1% | 1% | 0% | 0% | 0% | 1% |

Those firms demonstrating the most dynamic growth are more likely to be risk takers, and those simply planning to remain the same size over the next 5 years are comparatively more likely to be classified as risk averse.

Table 11.1.2 Attitude to Risk – By Growth

| Past Growth | Growth Objectives | |-------------|-------------------| | Stayed same | Moderate growth | Substantial growth | | | Stay same | Moderate growth | Substantial growth | | Base | 171 | 390 | 199 | 123 | 476 | 272 | | Risk Averse | 15% | 13% | 11% | 25% | 10% | 11% | | Calculated Risks | 66% | 64% | 58% | 53% | 70% | 53% | | Risk Taker | 19% | 22% | 30% | 22% | 20% | 34% | | Don't know | 0% | 2% | 0% | 0% | 1% | 1% | 11.2 Impact of Perceived Risks on Overseas Activity

Firms were read out a list of 6 possible risks when doing business overseas, and asked whether they had ever been put off from entering a particular overseas market as a result of each one. They were then asked whether they had significantly altered the way they do business in any overseas markets as a result of these risks. These results are summarised below.

Chart 11.2.1 Impact of Perceived Risks on Overseas Activity

Overall, 70% of firms had been put off from entering a market due to one of the above risks, and 16% had still pursued opportunities in an overseas market but significantly altered the way they went about this as a result of the perceived risk.

The risk of not being paid (in full or on time) is the most significant deterrent to overseas expansion, with half of all firms (49%) deciding against entering a market because of this risk and 11% significantly altering the way they do business there as a result.

All of the individual risks tested have a significant impact on the behaviour of internationalising firms, with at least 25% reporting that that they have decided against entering an overseas market because of each one. As seen below, UKTI users are significantly more likely than non-users to have decided against entering overseas markets because of the risks involved (83% vs. 67%). In particular, users are more likely to have been deterred by the risk of not seeing a return on their investment (52% vs. 30%).

However, this should not be interpreted as meaning that UKTI users are more risk averse, and there is some evidence that users are in fact slightly less risk averse than non-users (see Chapter 11.1). Instead, it may be a reflection of the fact that UKTI users tend to be more ‘involved’ exporters (i.e. have been exporting longer, operate in more markets) and hence have had more opportunity to encounter these risks. It is also the case that users are significantly more likely to be active in fast growing or emerging markets, where the likelihood of encountering some of these risks may be higher.

Table 11.2.1 Impact of Perceived Risk on Overseas Activity - By UKTI Usage

| Have you been put off from doing business in a particular country because of any of the following risks? | Total | UKTI Usage | Non-User | |---|---|---|---| | Base | 900 | 189 | 711 | | Not being paid in full or on time | 49% | 54% | 47% | | Safety or security of staff | 25% | 37% | 22% | | Political or economic instability | 37% | 45% | 35% | | IP Theft | 29% | 38% | 26% | | Bribery, corruption or organised crime | 32% | 44% | 29% | | Not seeing return on investment | 35% | 52% | 30% | | None of these | 30% | 18% | 33% | | Don't know | 0% | 0% | 0% | | Net: Put off by any risk | 70% | 83% | 67% |

| Have you significantly altered the way you do business in a particular country because of any of the following risks? | Total | UKTI Usage | Non-User | |---|---|---|---| | Not being paid in full or on time | 11% | 14% | 11% | | Safety or security of staff | 4% | 5% | 4% | | Political or economic instability | 6% | 10% | 4% | | IP Theft | 3% | 4% | 3% | | Bribery, corruption or organised crime | 5% | 8% | 4% | | Not seeing return on investment | 5% | 8% | 4% | | None of these | 81% | 77% | 82% | | Don't know | 3% | 3% | 2% | | Net: Affected by any risk | 16% | 19% | 15% | Interestingly, there is little correlation between firms’ risk classification and the likelihood of them abandoning or changing their plans overseas as a result of the perceived risks involved. Overall, similar proportions of ‘risk takers’ and ‘risk averse’ firms have decided against entering a particular market due to the risk involved (69% and 66% respectively), and the former are significantly more likely to have abandoned their plans as a result of some of the individual risks (e.g. not seeing a return on their investment, IP theft). This suggests that those firms that categorise themselves as risk takers still weigh up the risks involved and do not go ahead if these are deemed to be too great.

Table 11.2.2 Impact of Perceived Risk on Overseas Activity - By Attitude to Risk

| Attitude to Risk | Risk Averse | Calculated Risks | Risk Taker | |------------------|-------------|------------------|------------| | Base | 108 | 557 | 227 |

Have you been put off from doing business in a particular country because of any of the following risks?

| Risk | Risk Averse | Calculated Risks | Risk Taker | |-------------------------------------------|-------------|------------------|------------| | Not being paid in full or on time | 42% | 53% | 43% | | Safety or security of staff | 21% | 27% | 24% | | Political or economic instability | 37% | 39% | 33% | | IP Theft | 20% | 31% | 30% | | Bribery, corruption or organised crime | 32% | 33% | 33% | | Not seeing return on investment | 26% | 36% | 36% | | None of these | 34% | 28% | 31% | | Don’t know | 0% | 0% | 1% | | **Net: Put off by any risk** | **66%** | **72%** | **69%** |

Have you significantly altered the way you do business in a particular country because of any of the following risks?

| Risk | Risk Averse | Calculated Risks | Risk Taker | |-------------------------------------------|-------------|------------------|------------| | Not being paid in full or on time | 11% | 11% | 13% | | Safety or security of staff | 5% | 4% | 4% | | Political or economic instability | 4% | 5% | 7% | | IP Theft | 3% | 3% | 6% | | Bribery, corruption or organised crime | 4% | 4% | 7% | | Not seeing return on investment | 4% | 5% | 7% | | None of these | 85% | 82% | 77% | | Don’t know | 1% | 3% | 4% | | **Net: Affected by any risk** | **14%** | **15%** | **19%** | As seen below, there is little difference in the impact of these risks by age of firm. However, it does appear that the likelihood of abandoning or significantly altering overseas plans due to the perceived risks increases amongst larger firms.

Table 11.2.3 Impact of Perceived Risk on Overseas Activity – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | All SMEs | |---------------------|-----------------------------|---------| | Up to 5 | 6-10 | Over 10 | | Base | 253 | 255 | 392 | | | 644 | 192 | 46 | 17 | 882 |

Have you been put off from doing business in a particular country because of any of the following risks?

| Risk | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-249 | 250+ | All SMEs | |-------------------------------------------|---------|------|---------|-----|-------|--------|------|----------| | Not being paid in full or on time | 49% | 51% | 48% | 47% | 52% | 49% | 67% | 49% | | Safety or security of staff | 23% | 27% | 25% | 22% | 30% | 32% | 39% | 25% | | Political or economic instability | 35% | 36% | 38% | 33% | 42% | 45% | 76% | 36% | | IP Theft | 29% | 29% | 29% | 29% | 28% | 33% | 30% | 29% | | Bribery, corruption or organised crime | 32% | 34% | 32% | 30% | 39% | 26% | 51% | 32% | | Not seeing return on investment | 33% | 38% | 34% | 33% | 37% | 44% | 57% | 34% | | None of these | 30% | 27% | 31% | 31% | 28% | 23% | 12% | 30% | | Don't know | 0% | 0% | 0% | 0% | 0% | 2% | 0% | 0% | | Net: Put off by any risk | 70% | 73% | 69% | 69% | 72% | 75% | 88% | 70% |

Have you significantly altered the way you do business in a particular country because of any of the following risks?

| Risk | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-249 | 250+ | All SMEs | |-------------------------------------------|---------|------|---------|-----|-------|--------|------|----------| | Not being paid in full or on time | 10% | 14% | 11% | 11% | 12% | 10% | 12% | 11% | | Safety or security of staff | 4% | 3% | 4% | 4% | 4% | 5% | 9% | 4% | | Political or economic instability | 7% | 7% | 5% | 5% | 7% | 2% | 12% | 5% | | IP Theft | 3% | 4% | 4% | 4% | 3% | 5% | 0% | 4% | | Bribery, corruption or organised crime | 5% | 6% | 5% | 4% | 6% | 2% | 15% | 5% | | Not seeing return on investment | 5% | 7% | 5% | 6% | 3% | 5% | 9% | 5% | | None of these | 81% | 79% | 82% | 82% | 81% | 82% | 73% | 81% | | Don't know | 3% | 3% | 3% | 3% | 1% | 5% | 6% | 3% | | Net: Affected by any risk | 15% | 18% | 15% | 15% | 19% | 13% | 21% | 16% | Firms planning to grow substantially are more likely to have both been put off from doing business in overseas markets and to have significantly altered their business approach as a result of the perceived risks.

Table 11.2.4 Impact of Perceived Risk on Overseas Activity – By Growth

| Past Growth | Growth Objectives | |-------------|-------------------| | | Stayed same | Moderate growth | Substantial growth | Stayed same | Moderate growth | Substantial growth | | Base | 171 | 390 | 199 | 123 | 476 | 272 |

Have you been put off from doing business in a particular country because of any of the following risks?

| Risk | Stayed same | Moderate growth | Substantial growth | Stayed same | Moderate growth | Substantial growth | |-------------------------------------|-------------|-----------------|--------------------|-------------|-----------------|--------------------| | Not being paid in full or on time | 45% | 52% | 46% | 42% | 50% | 52% | | Safety or security of staff | 22% | 26% | 30% | 19% | 24% | 31% | | Political or economic instability | 35% | 39% | 38% | 30% | 37% | 42% | | IP Theft | 26% | 30% | 25% | 18% | 30% | 32% | | Bribery, corruption or organised crime | 25% | 34% | 35% | 30% | 32% | 37% | | Not seeing return on investment | 35% | 36% | 32% | 25% | 36% | 39% | | None of these | 33% | 28% | 29% | 36% | 30% | 24% | | Don’t know | 0% | 0% | 1% | 0% | 0% | 1% | | **Net: Put off by any risk** | **67%** | **72%** | **70%** | **64%** | **70%** | **75%** |

Have you significantly altered the way you do business in a particular country because of any of the following risks?

| Risk | Stayed same | Moderate growth | Substantial growth | Stayed same | Moderate growth | Substantial growth | |-------------------------------------|-------------|-----------------|--------------------|-------------|-----------------|--------------------| | Not being paid in full or on time | 8% | 12% | 13% | 9% | 11% | 14% | | Safety or security of staff | 5% | 4% | 6% | 2% | 3% | 7% | | Political or economic instability | 7% | 6% | 7% | 3% | 5% | 10% | | IP Theft | 3% | 4% | 5% | 2% | 2% | 7% | | Bribery, corruption or organised crime | 5% | 5% | 7% | 4% | 4% | 8% | | Not seeing return on investment | 7% | 4% | 6% | 2% | 4% | 9% | | None of these | 82% | 82% | 75% | 88% | 83% | 72% | | Don’t know | 3% | 3% | 3% | 1% | 2% | 5% | | **Net: Affected by any risk** | **14%** | **16%** | **22%** | **11%** | **14%** | **23%** | 11.3 Risk Perception of BRIC Markets

11.3.1 Overview

Firms were asked to assess how risky they felt it would be to do business in each of the BRIC markets (i.e. Brazil, Russia, India and China), and these results are summarised below. Please note that these questions were asked to all firms, irrespective of whether or not they were already doing business in these countries.

As demonstrated above, Russia is considered to be the most risky of the BRIC markets, with 59% of internationalising firms judging it to be ‘very’ or ‘fairly’ risky. For the other markets there was a broadly even split between firms feeling that they were very/fairly risky and those perceiving them to be not particularly/not at all risky. 11.3.2 Brazil

As seen below, there is some suggestion that UKTI users view Brazil as being slightly less risky than non-users, although this difference is not statistically significant. However, there is a notable difference in perceptions between firms that are currently doing business in Brazil and those that are not, with the former much less likely to view Brazil as a risky proposition. This might suggest that firms are being put off by their perception of Brazil, when the reality of doing business there may not involve as many risks as they fear.

Table 11.3.2.1 Perceived Risk of Brazil

- By UKTI Usage & Whether Doing Business There

| Perceived Risk of Brazil | Total | UKTI Usage | Doing Business in Brazil | |--------------------------|-------|------------|--------------------------| | | | UKTI User | Non-User | | | | Yes | No | | Base | 900 | 189 | 711 | 84 | 804 | | Very risky | 8% | 5% | 9% | 2% | 9% | | Fairly risky | 32% | 34% | 32% | 15%| 35%| | Not particularly risky | 32% | 37% | 31% | 50%| 30%| | Not at all risky | 15% | 12% | 15% | 29%| 13%| | Don’t know | 12% | 11% | 13% | 3% | 13%|

Unsurprisingly, the lower the perceived risk of Brazil, the more likely the firm is to do business there. Just 4% of firms that judge Brazil to be ‘very risky’ are either already operating there or very likely to do so. However, it should be noted that risk is clearly not the only reason that firms are not doing business in Brazil, with 54% of those that feel it is ‘not at all risky’ still not intending to enter the market.

Table 11.3.2.2 Likelihood of Doing Business in Brazil

- By Perceived Risk

| Perceived Risk of Brazil | Very risky | Fairly risky | Not particularly risky | Not at all risky | |--------------------------|------------|--------------|------------------------|------------------| | Base | 79 | 294 | 286 | 132 | | Already in | 3% | 5% | 16% | 20% | | Very likely | 1% | 4% | 6% | 10% | | Quite likely | 7% | 11% | 19% | 16% | | Unlikely | 89% | 80% | 57% | 54% | | Don’t know | 1% | 1% | 2% | 0% | 11.3.3 Russia

As noted previously, Russia is seen as the highest risk of the BRIC markets. Whilst there is little difference between users and non-users of UKTI in this respect, it is clear that firms that are not doing business in Russia are more negative about the associated risks. However, many firms that are currently operating in Russia are still conscious of the risks involved, with 39% of this group describing it as very or fairly risky.

Table 11.3.3.1 Perceived Risk of Russia

- By UKTI Usage & Whether Doing Business There

| Perceived Risk of Russia | Total | UKTI Usage | Doing Business in Russia | |-------------------------|-------|------------|--------------------------| | | Base | UKTI User | Non-User | Yes | No | | Very risky | 23% | 25% | 22% | 9% | 25%| | Fairly risky | 36% | 37% | 35% | 30% | 37%| | Not particularly risky | 22% | 25% | 22% | 36% | 20%| | Not at all risky | 11% | 7% | 12% | 21% | 9% | | Don't know | 8% | 5% | 9% | 5% | 9% |

As expected, firms that do not perceive Russia to be a risky market are more inclined to do business there.

Table 11.3.3.2 Likelihood of Doing Business in Russia

- By Perceived Risk

| Perceived Risk of Russia | Very risky | Fairly risky | Not particularly risky | Not at all risky | |-------------------------|------------|--------------|------------------------|------------------| | Base | 201 | 325 | 202 | 96 | | Already in | 5% | 11% | 22% | 26% | | Very likely | 4% | 4% | 5% | 4% | | Quite likely | 7% | 18% | 20% | 16% | | Unlikely | 84% | 66% | 51% | 52% | | Don't know | 0% | 1% | 2% | 1% | 11.3.4 India

As with the other BRIC markets, firms currently doing business in India tend to view it as less risky than those not operating there, suggesting that some firms may be put off by a perception of the business environment in India that does not entirely reflect the reality. There is no difference in the risk perception of India between UKTI users and non-users.

Table 11.3.4.1 Perceived Risk of India

- By UKTI Usage & Whether Doing Business There

| Perceived Risk of India | Total | UKTI Usage | Doing Business in India | |-------------------------|-------|------------|-------------------------| | | Base | UKTI User | Non-User | Yes | No | | Very risky | 900 | 189 | 711 | 125 | 761 | | Fairly risky | 10% | 10% | 10% | 3% | 11% | | Not particularly risky | 30% | 33% | 29% | 19% | 32% | | Not at all risky | 36% | 36% | 36% | 49% | 34% | | Don't know | 17% | 15% | 17% | 27% | 15% |

As seen below, the greater the perceived risk of doing business in India, the less likely firms are to export there.

Table 11.3.4.2 Likelihood of Doing Business in India

- By Perceived Risk

| Perceived Risk of India | Very risky | Fairly risky | Not particularly risky | Not at all risky | |-------------------------|------------|--------------|------------------------|-----------------| | Base | 88 | 279 | 322 | 146 | | Already in | 5% | 10% | 20% | 25% | | Very likely | 5% | 7% | 6% | 12% | | Quite likely | 10% | 23% | 23% | 18% | | Unlikely | 79% | 58% | 50% | 44% | | Don't know | 0% | 2% | 1% | 1% | 11.3.5 China

Unlike the other BRIC markets, for China there is a difference in the risk perception between users and non-users of UKTI, with the former significantly more likely to view it as either very or fairly risky. Whilst firms that already operate in China view the risks as considerably lower than those not doing business there, it is worth noting that over a quarter of the former group still judge it to be very or fairly risky.

Table 11.3.5.1 Perceived Risk of China

- By UKTI Usage & Whether Doing Business There

| Perceived Risk of China | Total | UKTI Usage | Doing Business in China | |-------------------------|-------|------------|-------------------------| | | Base | UKTI User | Non-User | Yes | No | | Very risky | 13% | 17% | 12% | 5% | 14%| | Fairly risky | 32% | 35% | 31% | 23% | 34%| | Not particularly risky | 33% | 29% | 34% | 43% | 32%| | Not at all risky | 15% | 12% | 16% | 27% | 13%| | Don’t know | 7% | 7% | 7% | 3% | 7% |

As was the case with the other BRIC markets, firms that perceive China as a lower risk are more likely to do business there.

Table 11.3.5.2 Likelihood of Doing Business in China

- By Perceived Risk

| Perceived Risk of China | Very risky | Fairly risky | Not particularly risky | Not at all risky | |-------------------------|------------|--------------|------------------------|------------------| | Base | 113 | 294 | 293 | 139 | | Already in | 6% | 11% | 20% | 27% | | Very likely | 2% | 6% | 9% | 11% | | Quite likely | 11% | 21% | 23% | 13% | | Unlikely | 80% | 60% | 47% | 47% | | Don’t know | 1% | 1% | 0% | 1% | 12. Market Entry Motivations & Preparations

12.1 Market Entry Motivations

12.1.1 Most Recent Market

Firms were asked whether, when they entered their most recent overseas market, this was mainly prompted by an enquiry from a potential customer, the identification that there may be opportunities for their business there or because they already had contacts there. Please note that although a firm’s decision to enter a market could be influenced by a combination of these factors, they were asked to pick the single main reason for first investigating that market.

Chart 12.1.1.1 Market Entry Motivations (Most Recent Market) - By UKTI Usage

As demonstrated above, most firms were fairly opportunistic when deciding to target their most recent market, with 57% reacting to enquiries from potential customers and 24% prompted by the fact they already had contacts there. Only 18% indicated that the primary reason for considering this market was that they had identified internally that there may be opportunities there.

While this is true of both users and non-users, the former appear to be a little less reactive in their approach, and are comparatively more likely to be driven by either existing contacts or the prior identification of opportunities. The table below illustrates that even amongst older firms market entry decisions are largely driven by customer enquiries. However, larger firms tend to be a little less reactive and are more likely to have identified internally that the market represented an opportunity for their business.

Table 12.1.1.1 Market Entry Motivations (Most Recent Market) - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Enquiry from customer | Identified possible opportunity | Already had contacts there | Don't know | |---------------------|-----------------------------|-----------------------|-------------------------------|---------------------------|------------| | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-249 | 250+ | All SMEs | | Base: All exporting | 215 | 235 | 382 | 587 | 181 | 46 | 17 | 814 | | Enquiry from customer | 54% | 53% | 59% | 60% | 53% | 47% | 45% | 57% | | Identified possible opportunity | 18% | 20% | 17% | 14% | 22% | 33% | 30% | 18% | | Already had contacts there | 26% | 26% | 23% | 25% | 24% | 15% | 24% | 24% | | Don't know | 1% | 1% | 1% | 1% | 0% | 5% | 0% | 1% |

There is no difference in market entry motivations by the number of years firms have been doing business overseas. However, there is some evidence that firms with a large international presence (active in more than 10 markets) are less likely to simply react to customer enquiries and are correspondingly more likely to decide to enter a market after identifying that it offered opportunities for them.

Table 12.1.1.2 Market Entry Motivations (Most Recent Market) - By Export Experience

| Experience (Years Exporting) | Number of Markets | |------------------------------|-------------------| | Under 2 | 2-10 | Over 10 | | Base: All exporting | 132 | 448 | 248 | | Enquiry from customer | 58% | 57% | 57% | | Identified possible opportunity | 19% | 18% | 18% | | Already had contacts there | 22% | 24% | 23% | | Don't know | 1% | 1% | 1% |

| Experience (Years Exporting) | Number of Markets | |------------------------------|-------------------| | 1-5 | 6-10 | Over 10 | | Base: All exporting | 438 | 178 | 211 | | Enquiry from customer | 59% | 60% | 52% | | Identified possible opportunity | 15% | 17% | 24% | | Already had contacts there | 26% | 21% | 22% | | Don't know | 1% | 2% | 2% |

| Experience (Years Exporting) | Number of Markets | |------------------------------|-------------------| | 6-10 | Over 10 | | Base: All exporting | 178 | 211 | | Enquiry from customer | 60% | 52% | | Identified possible opportunity | 17% | 24% | | Already had contacts there | 21% | 22% | | Don't know | 2% | 2% | 12.1.2 Other Markets

Firms were also asked to think about all the markets that they had entered over the past few years and indicate whether this had generally been prompted by enquiries from potential customers or because they had identified that there may be opportunities in these markets. Please note that firms that were not yet exporting and those only doing business in a single country were not asked this question and have been excluded from the analysis.

Chart 12.1.2.1 Market Entry Motivations (Other Markets) - By UKTI Usage

Reflecting the motivations for entering their most recent market (see previous section), when asked about their typical reasons for entering new markets the majority of firms highlighted customer enquiries.

UKTI users appear to be more strategic in their approach, with 18% indicating that prior identification of opportunities was the main stimulus for market entry and a further 37% reporting that it was a combination of this and customer enquiries (compared to 13% and 21% respectively for non-user firms). There is evidence that smaller firms are more inclined to take market entry decisions based largely on customer enquiries. However, there is little difference by age of firm in this respect.

Table 12.1.2.1 Market Entry Motivations (Other Markets)

- By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Enquiry from customer | Identified possible opportunity | Varies/mixture of both | Don't know/Not entered any markets recently | |---------------------|-----------------------------|-----------------------|---------------------------------|------------------------|------------------------------------------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-249 | 250+ | All SMEs | | Base: All exporting to more than 1 market | 179 | 203 | 342 | 496 | 166 | 44 | 17 | 706 | | Enquiry from customer | 54% | 57% | 61% | 63% | 59% | 33% | 27% | 60% | | Identified possible opportunity | 15% | 15% | 14% | 12% | 17% | 26% | 18% | 14% | | Varies/mixture of both | 30% | 25% | 24% | 24% | 22% | 33% | 55% | 24% | | Don't know/Not entered any markets recently | 2% | 3% | 1% | 1% | 2% | 8% | 0% | 2% |

Interestingly, there is some indication that very recent exporters are more inclined to enter overseas markets after identifying them as offering opportunities, rather than solely reacting to customer enquiries. However, when looking at the data by the number of countries that firms are operating in, it seems that those active in more markets are more likely to be driven by the prior identification of opportunities.

Table 12.1.2.2 Market Entry Motivations (Other Markets)

- By Export Experience

| Experience (Years Exporting) | Number of Markets | |------------------------------|-------------------| | Under 2 | 2-10 | Over 10 | | Base: All exporting to more than 1 market | 96 | 387 | 237 | 330 | 178 | 211 | | Enquiry from customer | 49% | 60% | 59% | 69% | 60% | 44% | | Identified possible opportunity | 21% | 14% | 14% | 12% | 14% | 19% | | Varies/mixture of both | 26% | 24% | 26% | 17% | 23% | 37% | | Don't know/Not entered any markets recently | 3% | 2% | 1% | 2% | 3% | 0% | 12.1.3 Most Challenging Market

Firms were asked to identify the most challenging overseas market that they had done business in, and asked for their reasons for entering this market.

Table 12.1.3.1 Market Entry Motivations (Most Challenging Market) - By UKTI Usage

| Motivation | Total | UKTI Usage | | | |---------------------------------------------------------------------------|-------|------------|----------|----------| | | | UKTI User | Non-User | | Base: All exporting | 832 | 178 | 654 | | You received an approach or enquiry from a potential customer or partner there | 69% | 68% | 70% | | A customer that you were already doing business with requested that you start doing business there | 39% | 36% | 41% | | There was someone in your company who already had experience of that country or contacts there | 27% | 29% | 26% | | A company that you were already doing business with in a different market helped you to start doing business there | 26% | 32% | 24% | | This country is at the forefront of developments for your industry | 19% | 18% | 20% | | None of these | 3% | 4% | 3% | | Don't know | 1% | 2% | 0% |

Reflecting the motivations for entering their most recent market and for entering overseas markets in general, the most widespread reason for firms entering their ‘most challenging’ market was enquiries from potential customers or partners.

It is also apparent that other companies can have a significant impact on firms’ market entry decisions, with 39% indicating that they entered their most challenging market because an existing customer requested that they do so, and 26% reporting that they had been helped by a company they were already working with in a different market.

The only statistically significant difference between users and non-users of UKTI is that the former were more likely to have been helped by a company they were already doing business with elsewhere. Although there are relatively few differences by age of firm, more recently established companies were more likely to be motivated by in-house experience/contacts and by the chosen market being at the forefront of developments for their industry. Similarly, smaller firms were more likely to highlight in-house experience/contacts, and also more inclined to have entered the market in response to a request from an existing customer.

Table 12.1.3.2 Market Entry Motivations (Most Challenging Market) - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-249 | 250+ | All SMEs | |---------------------|-----------------------------|--------|------|---------|-----|-------|--------|------|---------| | Base: All exporting | | 215 | 235 | 382 | 587 | 181 | 46 | 17 | 814 | | Enquiry from potential customer/partner | | 69% | 69% | 69% | 72% | 63% | 65% | 57% | 70% | | Existing customer request | | 43% | 42% | 38% | 39% | 43% | 33% | 39% | 39% | | In-house experience or contacts | | 36% | 30% | 24% | 29% | 25% | 23% | 18% | 27% | | Helped by company working with in another market | | 22% | 25% | 27% | 25% | 27% | 20% | 39% | 25% | | Forefront of developments for the industry | | 25% | 19% | 18% | 20% | 18% | 17% | 30% | 19% | | None of these | | 5% | 5% | 3% | 3% | 4% | 5% | 6% | 3% | | Don't know | | 0% | 0% | 1% | 0% | 1% | 7% | 6% | 1% |

The only clear differences by export experience are that long-established exporters were more likely to have been helped by a company they were already working with in another market, and those in fewer markets were more likely to have been asked to enter the market by an existing customer.

Table 12.1.3.3 Market Entry Motivations (Most Challenging Market) - By Export Experience

| Experience (Years Exporting) | Number of Markets | Under 2 | 2-10 | Over 10 | 1-5 | 6-10 | Over 10 | |------------------------------|-------------------|--------|------|---------|-----|------|---------| | Base: All exporting | | 132 | 448 | 248 | 438 | 178 | 211 | | Enquiry from potential customer/partner | | 67% | 72% | 66% | 70% | 70% | 68% | | Existing customer request | | 41% | 41% | 36% | 45% | 37% | 32% | | In-house experience or contacts | | 28% | 26% | 27% | 29% | 24% | 26% | | Helped by company working with in another market | | 20% | 23% | 30% | 24% | 28% | 28% | | Forefront of developments for the industry | | 19% | 19% | 20% | 21% | 16% | 20% | | None of these | | 8% | 3% | 2% | 3% | 3% | 4% | | Don't know | | 0% | 0% | 2% | 0% | 1% | 1% | 12.2 Market Entry Preparations

12.2.1 Research Undertaken

Firms were asked about the extent of any research they had carried out before entering their most recent overseas market, as summarised below.

Table 12.2.1.1 Research Undertaken (Most Recent Market) - By UKTI Usage

| Research Undertaken | Total | UKTI Usage | | | |------------------------------------------------------------------------------------|-------|------------|----------|----------| | | | UKTI User | Non-User | | Base: All exporting | 832 | 178 | 654 | | Research the business environment and ways of working in that market | 31% | 48% | 25% | | Conduct a market analysis to identify its potential or the risks involved | 20% | 35% | 15% | | Pay an external organisation for any information or assistance about the market | 5% | 10% | 4% | | None of these | 62% | 40% | 68% | | Don’t know | 1% | 1% | 1% | | Net: Any of these | 37% | 59% | 31% |

Approaching a third of firms had researched the business environment before entering their most recent market, but only a fifth had conducted a more formal market analysis and very few had paid for any external assistance (from either public or private sector sources). It is notable that the majority of firms (62%) did not undertake any sort of research prior to market entry.

There is clear evidence that UKTI users conduct more comprehensive preparatory investigations before entering new markets, with half researching the business environment, a third carrying out a market analysis and 1 in 10 paying for external information or assistance. However, it is certainly not the case that all UKTI users carry out advance research, with 40% not doing any of these. The table below demonstrates that larger firms devote significantly more time and resources to researching overseas markets before deciding to enter them. However, there are no significant differences by age of firm in this respect.

Table 12.2.1.2 Research Undertaken (Most Recent Market) - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | All SMEs | |---------------------|---------------------------|---------| | Up to 5 | 6-10 | Over 10 | | Base: All exporting | 215 | 235 | 382 | 587 | 181 | 46 | 17 | 814 | | Research the business environment | 32% | 29% | 31% | 25% | 34% | 55% | 70% | 30% | | Conduct a market analysis | 21% | 20% | 20% | 17% | 19% | 37% | 51% | 19% | | Pay for any info/ assistance | 5% | 7% | 5% | 4% | 6% | 7% | 12% | 5% | | None of these | 58% | 59% | 63% | 67% | 58% | 35% | 18% | 63% | | Don't know | 0% | 0% | 1% | 0% | 1% | 5% | 0% | 1% | | Net: Any of these | 42% | 41% | 36% | 33% | 41% | 60% | 82% | 36% |

While there is no relationship between the length of time firms have been doing business overseas and the extent of the market entry preparation they conduct, it is clear that firms that are active in more than 10 markets have more robust and comprehensive procedures in place.

Table 12.2.1.3 Research Undertaken (Most Recent Market) - By Export Experience

| Experience (Years Exporting) | Number of Markets | |------------------------------|-------------------| | Under 2 | 2-10 | Over 10 | | Base: All exporting | 132 | 448 | 248 | 438 | 178 | 211 | | Research the business environment | 31% | 30% | 31% | 27% | 24% | 43% | | Conduct a market analysis | 18% | 20% | 21% | 17% | 18% | 27% | | Pay for any info/ assistance | 3% | 6% | 5% | 5% | 6% | 6% | | None of these | 62% | 61% | 63% | 66% | 67% | 49% | | Don't know | 1% | 1% | 1% | 0% | 2% | 0% | | Net: Any of these | 37% | 38% | 36% | 34% | 31% | 51% | 12.2.2 External Assistance

Firms were also asked about their use of external support, covering both formal/informal sources and paid-for/free-of-charge assistance. Please note that this question was asked in relation to firms’ most challenging overseas market (whereas the analysis in the previous section was based on their most recent market).

Table 12.2.2.1 External Assistance Used (Most Challenging Market) - By UKTI Usage

| Base: All exporting | Total | UKTI Usage | |---------------------|-------|------------| | | | UKTI User | Non-User | | Obtained information, advice or support from UKTI or a British embassy/consulate overseas | 832 | 178 | 654 | | Commissioned information, advice or support from any other external organisations | 7% | 31% | 0% | | Received less formal advice or help from friends, family or business associates | 10% | 20% | 7% | | None of these | 42% | 54% | 38% | | Don’t know | 52% | 29% | 60% | | Net: Any external support | 48% | 70% | 40% |

Approaching half of all firms (48%) had accessed some form of external assistance in relation to their most challenging market, although in the majority of cases this had consisted of informal advice from friends, family or business associates.

UKTI users are significantly more likely to have used external support (70% vs. 40% of non-users) in relation to their most challenging market. Although this difference is largely driven by the 31% using UKTI services (compared to 0% of non-users), it is apparent that UKTI users are also more likely to commission assistance from other (non-UKTI) sources and to draw on the expertise of friends or business associates. As seen below, the larger a firm is the more likely they are to seek external assistance when doing business overseas, and this is true of both formal support (i.e. from UKTI or other providers) and of less formal advice from friends or associates. Whilst there is no difference in the overall proportion accessing external support by age of firm, there is some indication that older firms are more inclined to use UKTI services and less likely to rely on advice from friends or business associates.

Table 12.2.2.2 External Assistance Used (Most Challenging Market) - By Age & Size

| Age (Years Trading) | Size (Number of Employees) | All SMEs | |---------------------|---------------------------|---------| | Up to 5 | 215 | 814 | | 6-10 | 235 | | | Over 10 | 382 | | | 0-9 | 587 | | | 10-49 | 181 | | | 50-249 | 46 | | | 250+ | 17 | | | Base: All exporting | | |

Obtained support from UKTI or embassies/consulates

| Age (Years Trading) | Size (Number of Employees) | All SMEs | |---------------------|---------------------------|---------| | Up to 5 | 2% | 7% | | 6-10 | 6% | | | Over 10 | 9% | | | 0-9 | 5% | | | 10-49 | 9% | | | 50-249 | 17% | | | 250+ | 37% | | | Base: All exporting | | |

Commissioned support from other organisations

| Age (Years Trading) | Size (Number of Employees) | All SMEs | |---------------------|---------------------------|---------| | Up to 5 | 8% | 9% | | 6-10 | 9% | | | Over 10 | 12% | | | 0-9 | 8% | | | 10-49 | 10% | | | 50-249 | 21% | | | 250+ | 45% | | | Base: All exporting | | |

Received advice from friends, family or business associates

| Age (Years Trading) | Size (Number of Employees) | All SMEs | |---------------------|---------------------------|---------| | Up to 5 | 45% | 41% | | 6-10 | 45% | | | Over 10 | 40% | | | 0-9 | 39% | | | 10-49 | 44% | | | 50-249 | 55% | | | 250+ | 63% | | | Base: All exporting | | |

None of these

| Age (Years Trading) | Size (Number of Employees) | All SMEs | |---------------------|---------------------------|---------| | Up to 5 | 53% | 53% | | 6-10 | 51% | | | Over 10 | 53% | | | 0-9 | 57% | | | 10-49 | 49% | | | 50-249 | 35% | | | 250+ | 12% | | | Base: All exporting | | |

Don’t know

| Age (Years Trading) | Size (Number of Employees) | All SMEs | |---------------------|---------------------------|---------| | Up to 5 | 0% | 0% | | 6-10 | 0% | | | Over 10 | 1% | | | 0-9 | 0% | | | 10-49 | 0% | | | 50-249 | 2% | | | 250+ | 6% | | | Base: All exporting | | |

Net: Any external support

| Age (Years Trading) | Size (Number of Employees) | All SMEs | |---------------------|---------------------------|---------| | Up to 5 | 47% | 47% | | 6-10 | 49% | | | Over 10 | 46% | | | 0-9 | 43% | | | 10-49 | 51% | | | 50-249 | 63% | | | 250+ | 82% | | | Base: All exporting | | |

Experienced exporters and those active in a greater number of markets are more likely to obtain support from UKTI and to commission assistance from other organisations.

Table 12.2.2.3 External Assistance Used (Most Challenging Market) - By Export Experience

| Experience (Years Exporting) | Number of Markets | |------------------------------|-------------------| | Under 2 | 132 | | 2-10 | 448 | | Over 10 | 248 | | 1-5 | 438 | | 6-10 | 178 | | Over 10 | 211 | | Base: All exporting | |

Obtained support from UKTI or embassies/consulates

| Experience (Years Exporting) | Number of Markets | |------------------------------|-------------------| | Under 2 | 5% | | 2-10 | 6% | | Over 10 | 10% | | 1-5 | 6% | | 6-10 | 4% | | Over 10 | 13% | | Base: All exporting | |

Commissioned support from other organisations

| Experience (Years Exporting) | Number of Markets | |------------------------------|-------------------| | Under 2 | 5% | | 2-10 | 9% | | Over 10 | 13% | | 1-5 | 8% | | 6-10 | 12% | | Over 10 | 14% | | Base: All exporting | |

Received advice from friends, family or business associates

| Experience (Years Exporting) | Number of Markets | |------------------------------|-------------------| | Under 2 | 43% | | 2-10 | 42% | | Over 10 | 41% | | 1-5 | 42% | | 6-10 | 37% | | Over 10 | 47% | | Base: All exporting | |

None of these

| Experience (Years Exporting) | Number of Markets | |------------------------------|-------------------| | Under 2 | 55% | | 2-10 | 52% | | Over 10 | 52% | | 1-5 | 54% | | 6-10 | 57% | | Over 10 | 45% | | Base: All exporting | |

Don’t know

| Experience (Years Exporting) | Number of Markets | |------------------------------|-------------------| | Under 2 | 0% | | 2-10 | 0% | | Over 10 | 0% | | 1-5 | 0% | | 6-10 | 1% | | Over 10 | 1% | | Base: All exporting | |

Net: Any external support

| Experience (Years Exporting) | Number of Markets | |------------------------------|-------------------| | Under 2 | 45% | | 2-10 | 48% | | Over 10 | 48% | | 1-5 | 46% | | 6-10 | 42% | | Over 10 | 54% | | Base: All exporting | | 13. Barriers to Overseas Trade

13.1 Barriers (Summary)

As mentioned previously, for the sections of the interview relating to drivers of market and barriers, firms were asked to focus on just one market, as follows:

- Firms were asked to select the ‘most challenging’ country that they had done business in over the last 5 years
- If they were unable to pick one, they were asked to select the country they had started doing business in ‘most recently’

For full details of the markets selected by users and non-users of UKTI, please refer to Annex A.

Firms were then read out 11 potential barriers that they might have faced when trying to develop their business in the selected market, and asked to indicate the extent to which each one had been a difficulty (using a 5 point scale, where 5 meant it had been ‘extremely difficult’ and 1 meant it had ‘not been at all difficult’). The barriers tested were as follows:

- Dealing with legal or tax regulations or standards in < MARKET >
- Protecting your intellectual property
- Ensuring you get paid and enforcing contracts
- Dealing with customs procedures or paperwork
- Identifying who to make contact with in the first instance or finding a suitable partner
- Establishing an initial dialogue with prospective customers or business partners in < MARKET >
- Building relationships with key influencers or decision-makers
- Obtaining basic information about doing business in < MARKET >
- Finding the necessary management time to devote to doing business in < MARKET >
- Negotiating the culture and language
- A preference on the part of customers in < MARKET > for doing business with firms from < MARKET >

Please note that all analysis in this section of the report is based just on firms that were already doing business overseas. The chart below shows the proportion of firms experiencing each barrier to a significant extent (i.e. scoring 4 or 5 out of 5 for the extent to which it was a difficulty). Details of the full distribution of scores for each individual barrier are shown in Chapter 13.2.

Chart 13.1.1 Individual Barriers

- Dealing with customs procedures & paperwork: 24%
- Ensuring you get paid & enforcing contracts: 23%
- Dealing with legal or tax regulations & standards: 21%
- Negotiating the language & culture: 16%
- Finding the necessary management time to do business there: 15%
- Identifying who to make contact with in the first instance: 14%
- Building relationships with key influencers or decision-makers: 13%
- Establishing an initial dialogue with prospective customers or partners: 12%
- Protecting your intellectual property: 12%
- Customer preference for doing business with other firms from their own country: 12%
- Obtaining basic information about doing business in that country: 10%

Base: All exporters (Base) (832)

The most widely experienced barriers all relate to the formalities and bureaucracy of doing business overseas, with 24% having significant problems with customs procedures, 23% with getting paid and 21% with legal or tax regulations.

As seen earlier (in Chapter 11.2), half of all firms had been deterred from entering a new market due to the risk of not being paid. It is clear from the above analysis that this fear is not without substance, as almost a quarter of firms have experienced significant difficulties in this respect. The table below shows further analysis of the barriers encountered by users and non-users of UKTI.

Table 13.1.1 Individual Barriers – By UKTI Usage

| Proportion experiencing significant difficulty (4-5 out of 5) with... | Total | UKTI Usage | |---------------------------------------------------------------|-------|------------| | | | UKTI User | Non-User | | **Base: All exporters** | 832 | 178 | 654 | | Dealing with customs procedures & paperwork | 24% | 29% | 23% | | Ensuring you get paid & enforcing contracts | 23% | 25% | 23% | | Dealing with legal or tax regulations & standards | 21% | 28% | 19% | | Negotiating the language & culture | 16% | 20% | 14% | | Finding the necessary management time to devote to doing business in there | 15% | 19% | 14% | | Identifying who to make contact with in the first instance | 14% | 20% | 12% | | Building relationships with key influencers or decision-makers| 13% | 19% | 11% | | Establishing an initial dialogue with prospective customers or partners | 12% | 18% | 10% | | Protecting your intellectual property | 12% | 17% | 10% | | Customer preference for doing business with firms from their own country | 12% | 18% | 10% | | Obtaining basic information about doing business in that country | 10% | 12% | 9% |

UKTI users are consistently more likely to report each of these barriers than non-users, although this difference is not statistically significant for customs procedures, getting paid, finding the necessary management time and obtaining basic information. This marked difference between users and non-users suggests that the experience of encountering these difficulties prompted firms to contact UKTI.

However, at this stage it should be remembered that respondents were asked to talk about the ‘most challenging’ market that they had done business in, and this is likely to be contributing towards the difference in the barriers experienced by users and non-users. UKTI users tend to have been doing business overseas longer, be operating in more markets and are more likely to be doing business in high growth markets. As such, they would appear to have a higher chance of having encountered a particularly ‘challenging’ market which involves significant barriers.

Overall, 43% of firms indicated that they had not experienced significant difficulties with any of these issues. When asked whether they had encountered any other significant problems, the vast majority of this group (88%) stated that they had not, suggesting that the current list of barriers that firms are prompted with is comprehensive and covers the major issues. The most widely mentioned additional barriers were different business procedures (2%), political unrest (2%) and legal/tax issues on the UK side (2%). The 11 individual barriers firms were prompted with have been summarised further as outlined below.

| Barriers - Summary | |--------------------| | Firms have been defined as perceiving significant ‘legal & regulatory’ barriers if they scored 4 or 5 on a 5-point scale for… | | • Dealing with legal or tax regulations or standards in <MARKET> | | • Or, Protecting your intellectual property | | • Or, Ensuring you get paid and enforcing contracts | | Firms have been defined as perceiving significant ‘customs’ barriers if they scored 4 or 5 on a 5-point scale for… | | • Dealing with customs procedures or paperwork | | Firms have been defined as perceiving significant ‘contacts’ barriers if they scored 4 or 5 on a 5-point scale for… | | • Identifying who to make contact with in the first instance or finding a suitable partner | | • Or, Establishing an initial dialogue with prospective customers or business partners in <MARKET> | | • Or, Building relationships with key influencers or decision-makers | | Firms have been defined as perceiving significant ‘information’ barriers if they scored 4 or 5 on a 5-point scale for… | | • Obtaining basic information about doing business in <market> | | Firms have been defined as perceiving significant ‘resource’ barriers if they scored 4 or 5 on a 5-point scale for… | | • Finding the necessary management time to devote to doing business in <MARKET> | | Firms have been defined as perceiving significant ‘language & cultural’ barriers if they scored 4 or 5 on a 5-point scale for… | | • Negotiating the language & culture | | Firms have been defined as perceiving significant ‘bias’ barriers if they scored 4 or 5 on a 5-point scale for… | | • A preference on the part of customers in <MARKET> for doing business with firms from <MARKET> | The table below shows the proportions of firms scoring against each of these summary categories as well as an analysis of the number of individual barriers experienced to a significant extent.

Table 13.1.2 Summary Barriers – By UKTI Usage

| Types of Barriers | Total | UKTI Usage | Non-User | |-----------------------------------|-------|------------|----------| | | | UKTI User | Non-User | | Base: All exporters | 832 | 178 | 654 | | Legal & regulatory barriers | 37% | 43% | 35% | | Customs barriers | 24% | 29% | 23% | | Contacts barriers | 24% | 34% | 20% | | Information barriers | 10% | 12% | 9% | | Resource barriers | 15% | 19% | 14% | | Language & cultural barriers | 16% | 20% | 14% | | Bias barriers | 12% | 18% | 10% |

| Number of Barriers | | | | |-----------------------------------|-------|------------|----------| | At least one significant individual barrier | 57% | 72% | 52% | | - One | 16% | 19% | 15% | | - Two | 13% | 14% | 12% | | - Three | 10% | 14% | 9% | | - Four or more | 18% | 26% | 16% | | No significant barriers | 43% | 28% | 48% |

As has been the case in past UKTI studies, internationalising firms are most likely to be affected by legal and regulatory barriers, contacts barriers and customs barriers.

Overall, well over half (57%) of firms have experienced at least one significant barrier in their selected market (which, it should be noted, is the ‘most challenging market’ many have done business in). A significant proportion (18%) have encountered significant difficulties with four or more of the individual barriers, suggesting there is a clear need for some form of external assistance to help firms overcome these barriers and successfully trade in overseas markets.

UKTI users clearly come across more significant barriers than non-users, with 72% experiencing at least one, compared to just 52% of non-users. Users are more likely to encounter each of the barrier types (although please note that this difference is not statistically significant for customs barriers, information barriers and resource barriers).

Interestingly, the proportion of firms experiencing any significant barriers has fallen since the 2011 survey (from 67% to 57% currently), and this drop is evident for both users and non-users of UKTI. This may be connected to the corresponding fall in the proportion of firms that are active in emerging/fast growing markets (down from 46% to 40%), as these markets tend to present firms with greater challenges. Firms operating overseas sites are most likely to have encountered all of the barrier types and also tend to have encountered a greater number of barriers, and operating overseas through contractual arrangements is also associated with a greater incidence of barriers.

Table 13.1.3 Individual Barriers – By Modes Used In Selected Market

| Types of Barriers | Selling direct | Agents/distributors | Contractual arrangements | Overseas site | |-----------------------------------|----------------|---------------------|--------------------------|---------------| | Base: All exporters | 658 | 221 | 43 | 51 | | Legal & regulatory barriers | 35% | 39% | 43% | 51% | | Customs barriers | 24% | 24% | 28% | 40% | | Contacts barriers | 23% | 26% | 38% | 38% | | Information barriers | 9% | 11% | 14% | 18% | | Resource barriers | 15% | 19% | 17% | 23% | | Language & cultural barriers | 15% | 13% | 20% | 21% | | Bias barriers | 12% | 12% | 13% | 27% |

Number of Barriers

| At least one significant individual barrier | 56% | 60% | 73% | 75% | |--------------------------------------------|-----|-----|-----|-----| | - One | 16% | 17% | 22% | 12% | | - Two | 12% | 15% | 7% | 20% | | - Three | 10% | 10% | 20% | 15% | | - Four or more | 18% | 19% | 24% | 28% | | No significant barriers | 44% | 40% | 27% | 25% | The table below provides further analysis of the barriers experienced by firms’ motivations for trying to enter that particular market.

Table 13.1.4 Summary Barriers – By Market Entry Motivations

| Significant Motivations | Enquiry from potential customer | Existing customer request | In-house experience or contacts | Helped by company already working with in another market | Market is at forefront of developments for industry | |--------------------------|---------------------------------|---------------------------|---------------------------------|--------------------------------------------------------|--------------------------------------------------| | Base: All exporters | 576 | 334 | 238 | 208 | 168 |

Types of Barriers

| Types of Barriers | Legal & regulatory | Customs | Contacts | Information | Resource | Language & cultural | Bias | Number of Barriers | |-------------------|--------------------|---------|----------|-------------|----------|---------------------|------|-------------------| | | 37% | 23% | 21% | 10% | 14% | 15% | 10% | At least one barrier | | | 41% | 26% | 25% | 10% | 16% | 18% | 14% | - One | | | 36% | 24% | 23% | 8% | 15% | 13% | 12% | - Two | | | 40% | 31% | 29% | 12% | 20% | 21% | 17% | - Three | | | 39% | 22% | 26% | 8% | 12% | 17% | 18% | - Four or more | | | | | | | | | | No significant barriers |

There is some evidence to suggest that firms who entered markets in response to an approach or enquiry from a potential customer are less likely to encounter significant barriers. Perhaps counter intuitively, those firms that were helped to enter a market by a company they were already working with elsewhere appear more likely to face barriers, and the same is true of those targeting a market because it is at the forefront of developments for their industry. Firms who sought professional, external support with their market entry are more likely to have experienced difficulties, suggesting that encountering barriers prompts firms to seek assistance to help overcome them.

Table 13.1.5 Summary Barriers – By Support Received

| Received support about market from | UKTI (inc. Posts) | Other external organisations | Friends, family, associates | None of these | |-----------------------------------|-------------------|-----------------------------|-----------------------------|---------------| | Base: All exporters | 54 | 81 | 355 | 435 |

Types of Barriers

| Types of Barriers | Legal & regulatory | Customs | Contacts | Information | Resource | Language & cultural | Bias | |-------------------|--------------------|---------|----------|-------------|----------|--------------------|------| | | 57% | 36% | 46% | 19% | 25% | 30% | 17% | | | 49% | 41% | 37% | 16% | 21% | 26% | 24% | | | 43% | 29% | 32% | 11% | 19% | 19% | 17% | | | 30% | 19% | 16% | 8% | 12% | 11% | 8% |

Number of Barriers

| Number of Barriers | At least one barrier | One | Two | Three | Four or more | No significant barriers | |--------------------|----------------------|-----|-----|-------|--------------|-------------------------| | | 90% | 21% | 15% | 14% | 25% | 10% | | | 77% | 15% | 14% | 14% | 14% | 23% | | | 69% | 17% | 15% | 14% | 24% | 31% | | | 45% | 15% | 11% | 7% | 13% | 55% |

While it might be expected that larger firms are less likely to experience barriers due to their greater resources (and typically greater overseas experience), in fact the opposite is true and it is firms with less than 10 employees that are least likely to report barriers. There are no consistent differences by age of firm in this respect.

Table 13.1.6 Summary Barriers – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | All SMEs | |---------------------|-----------------------------|---------| | Up to 5 | 6-10 | Over 10 | | Base: All exporters | 215 | 235 | 382 | 587 | 181 | 46 | 17 | 814 |

Types of Barriers

| Types of Barriers | Legal & regulatory | Customs | Contacts | Information | Resource | Language & cultural | Bias | |-------------------|--------------------|---------|----------|-------------|----------|--------------------|------| | | 38% | 25% | 22% | 10% | 12% | 13% | 14% | | | 39% | 26% | 21% | 11% | 16% | 16% | 11% | | | 35% | 23% | 25% | 9% | 16% | 16% | 11% | | | 33% | 21% | 20% | 8% | 14% | 15% | 10% | | | 33% | 30% | 30% | 12% | 20% | 18% | 14% | | | 47% | 28% | 33% | 12% | 7% | 12% | 16% | | | 36% | 27% | 27% | 33% | 37% | 33% | 24% | | | 45% | 33% | 27% | 33% | 37% | 33% | 23% | | | 36% | 24% | 23% | 9% | 15% | 15% | 15% |

Number of Barriers

| Number of Barriers | At least one barrier | One | Two | Three | Four or more | No significant barriers | |--------------------|----------------------|-----|-----|-------|--------------|-------------------------| | | 54% | 16% | 11% | 11% | 17% | 46% | | | 58% | 16% | 13% | 11% | 19% | 42% | | | 57% | 16% | 13% | 9% | 19% | 43% | | | 51% | 15% | 12% | 9% | 11% | 49% | | | 68% | 14% | 14% | 9% | 11% | 32% | | | 68% | 24% | 15% | 9% | 12% | 32% | | | 76% | 15% | 12% | 9% | 12% | 24% | | | 56% | 16% | 13% | 10% | 18% | 44% | There is no evidence that barriers decline as firms become more experienced overseas and in fact the converse is true, as the more markets or experience a firm has, the more likely they are to encounter barriers. However, it should be remembered that this data relates to firms’ most challenging market, and experienced exporters are more likely to have encountered more difficult markets.

Table 13.1.7 Summary Barriers – By Export Experience

| Years Exporting | Number of Markets | |-----------------|-------------------| | | Less than 2 years | 2-10 years | Over 10 years | 1-5 | 6-10 | More than 10 | | Base: All exporters | 132 | 448 | 248 | 438 | 178 | 211 |

Types of Barriers

| Types of Barriers | Less than 2 years | 2-10 years | Over 10 years | 1-5 | 6-10 | More than 10 | |-------------------|-------------------|------------|---------------|-----|------|--------------| | Legal & regulatory | 26% | 36% | 40% | 30% | 38% | 48% | | Customs | 21% | 22% | 27% | 18% | 27% | 34% | | Contacts | 18% | 22% | 26% | 19% | 25% | 30% | | Information | 9% | 11% | 9% | 8% | 11% | 12% | | Resource | 13% | 14% | 18% | 12% | 18% | 19% | | Language & cultural | 10% | 17% | 16% | 11% | 20% | 19% | | Bias | 9% | 12% | 12% | 9% | 12% | 16% |

Number of Barriers

| Number of Barriers | Less than 2 years | 2-10 years | Over 10 years | 1-5 | 6-10 | More than 10 | |--------------------|-------------------|------------|---------------|-----|------|--------------| | At least one barrier | 49% | 55% | 61% | 49% | 61% | 68% | | - One | 16% | 15% | 17% | 17% | 16% | 14% | | - Two | 10% | 12% | 15% | 12% | 15% | 13% | | - Three | 11% | 10% | 9% | 6% | 9% | 16% | | - Four or more | 12% | 18% | 20% | 14% | 21% | 24% | | No significant barriers | 51% | 45% | 39% | 51% | 39% | 32% |

Firms that are active in only one overseas region are significantly less likely to have experienced any barriers.

Table 13.1.8 Summary Barriers – By Number of Regions

| Number of Overseas Regions Active In | One | Two | Three | Four | Five | |-------------------------------------|-----|-----|-------|------|------| | Base: All exporters | 270 | 196 | 151 | 115 | 98 |

Types of Barriers

| Types of Barriers | One | Two | Three | Four | Five | |-------------------|-----|-----|-------|------|------| | Legal & regulatory | 23% | 38% | 40% | 51% | 45% | | Customs | 15% | 22% | 31% | 35% | 28% | | Contacts | 15% | 24% | 31% | 28% | 27% | | Information | 7% | 9% | 16% | 11% | 6% | | Resource | 11% | 14% | 23% | 20% | 13% | | Language & cultural | 11% | 17% | 20% | 17% | 17% | | Bias | 9% | 11% | 13% | 18% | 12% |

Number of Barriers

| Number of Barriers | One | Two | Three | Four | Five | |--------------------|-----|-----|-------|------|------| | At least one barrier | 43% | 58% | 69% | 67% | 59% | | - One | 16% | 16% | 22% | 11% | 14% | | - Two | 9% | 12% | 17% | 15% | 12% | | - Three | 5% | 11% | 9% | 17% | 12% | | - Four or more | 12% | 19% | 21% | 24% | 21% | | No significant barriers | 57% | 42% | 31% | 33% | 41% | As seen below, innovative and IP active firms consistently report more barriers to overseas trade, and this is true of all the barrier types.

Table 13.1.9 Summary Barriers – By Innovation

| Types of Barriers | Innovative | IP Active | |-------------------|------------|-----------| | | Yes (alternative) | Yes | No | Yes | No | | Base: All exporters | 377 | 616 | 216 | 182 | 641 |

| Number of Barriers | At least one barrier | - One | - Two | - Three | - Four or more | No significant barriers | |--------------------|----------------------|-------|-------|----------|----------------|-------------------------| | Legal & regulatory | 61% | 14% | 15% | 13% | 19% | 39% | | Customs | 59% | 16% | 13% | 11% | 19% | 41% | | Contacts | 50% | 16% | 12% | 7% | 16% | 50% | | Information | 70% | 15% | 18% | 15% | 21% | 30% | | Resource | 54% | 16% | 8% | 15% | 18% | 46% | | Language & cultural| 44% | 19% | 16% | 14% | 18% | 35% | | Bias | 36% | 16% | 16% | 16% | 16% | 37% |

Firms with substantial growth aspirations are more likely to encounter significant barriers, suggesting that they are most in need of external assistance to enable them to fulfil their ambitions.

Table 13.1.10 Summary Barriers – By Innovation & Growth

| Growth Objectives | Innovation & Growth | |-------------------|---------------------| | | Stay same | Mod. growth | Sub. growth | Expect sub. growth | Other | Non innovative | | Base: All exporters | 121 | 448 | 235 | 186 | 430 | 216 |

| Types of Barriers | Legal & regulatory | Customs | Contacts | Information | Resource | Language & cultural | Bias | |-------------------|---------------------|---------|----------|-------------|----------|---------------------|------| | | 33% | 24% | 14% | 8% | 12% | 15% | 10% | | | 35% | 23% | 25% | 9% | 16% | 16% | 10% | | | 44% | 26% | 26% | 12% | 16% | 16% | 17% | | | 42% | 26% | 25% | 13% | 16% | 14% | 16% | | | 36% | 25% | 24% | 11% | 16% | 18% | 10% | | | 34% | 22% | 20% | 5% | 13% | 11% | 11% |

| Number of Barriers | At least one barrier | - One | - Two | - Three | - Four or more | No significant barriers | |--------------------|----------------------|-------|-------|----------|----------------|-------------------------| | | 51% | 16% | 13% | 5% | 17% | 49% | | | 56% | 15% | 13% | 10% | 18% | 44% | | | 65% | 19% | 14% | 14% | 19% | 35% | | | 63% | 18% | 13% | 13% | 19% | 37% | | | 58% | 15% | 13% | 10% | 19% | 43% | | | 50% | 16% | 12% | 7% | 16% | 50% | There is some suggestion that firms classified as ‘born global’ under the tighter definition are more likely to experience barriers, but this difference is not statistically significant.

Table 13.1.11 Summary Barriers – By Born Global & Young, Tech Intensive

| Types of Barriers | Up to 5 years old | Over 5 years old | |-------------------|-------------------|------------------| | | Total | Born global | Born global (alternative) | Young, tech intensive | Total | Born global | Born global (alternative) | Young, tech intensive | | Base: All exporters | 215 | 133 | 46 | 89 | 617 | 36% | 44% | 35% | | Legal & regulatory | 38% | 44% | 43% | 35% | 36% | 44% | 43% | 35% | | Customs | 25% | 29% | 30% | 26% | 24% | 29% | 30% | 26% | | Contacts | 22% | 25% | 30% | 21% | 24% | 25% | 30% | 21% | | Information | 10% | 9% | 11% | 13% | 10% | 9% | 11% | 13% | | Resource | 12% | 12% | 15% | 11% | 16% | 12% | 15% | 11% | | Language & cultural | 13% | 12% | 11% | 13% | 16% | 13% | 11% | 13% | | Bias | 14% | 15% | 9% | 15% | 11% | 15% | 9% | 15% |

There is clear evidence that high growth and ‘other’ markets are associated with greater barriers than those in the European Economic Area, and this is true for all types of barrier except bias. However, it should be noted that approaching half of the firms that were focusing on EEA markets had still experienced significant barriers.

Table 13.1.12 Summary Barriers – By Market Type

| Market | High Growth | EEA | Other | |--------|-------------|-----|-------| | Base: All exporters | 261 | 315 | 256 | | Types of Barriers | | | | | Legal & regulatory | 48% | 26% | 38% | | Customs | 34% | 14% | 26% | | Contacts | 30% | 16% | 26% | | Information | 13% | 8% | 9% | | Resource | 18% | 11% | 17% | | Language & cultural | 23% | 12% | 13% | | Bias | 12% | 12% | 11% | | Number of Barriers | | | | | At least one barrier | 69% | 44% | 59% | | - One | 18% | 15% | 15% | | - Two | 14% | 9% | 15% | | - Three | 10% | 8% | 12% | | - Four or more | 27% | 12% | 16% | | No significant barriers | 31% | 56% | 41% | The table below provides analysis of the barriers experienced by individual market. Please note that it has only been possible to provide this analysis for markets selected by at least 30 respondents.

Table 13.1.13 Summary Barriers – By Individual Market

| Market | China | France | Germany | India | Ireland | Russia | USA | |--------|-------|--------|---------|-------|---------|--------|-----| | Base: All exporters | 58 | 48 | 36 | 37 | 61 | 45 | 59 |

Types of Barriers

| Types of Barriers | China | France | Germany | India | Ireland | Russia | USA | |-------------------|-------|--------|---------|-------|---------|--------|-----| | Legal & regulatory | 58% | 29% | 12% | 45% | 16% | 58% | 40% | | Customs | 25% | 24% | 15% | 31% | 3% | 58% | 20% | | Contacts | 40% | 28% | 21% | 29% | 6% | 38% | 21% | | Information | 10% | 12% | 9% | 8% | 6% | 26% | 5% | | Resource | 22% | 21% | 9% | 17% | 7% | 16% | 16% | | Language & cultural | 40% | 35% | 16% | 11% | 0% | 26% | 6% | | Bias | 18% | 40% | 4% | 13% | 1% | 7% | 14% |

Number of Barriers

| Number of Barriers | China | France | Germany | India | Ireland | Russia | USA | |--------------------|-------|--------|---------|-------|---------|--------|-----| | At least one barrier | 75% | 56% | 39% | 60% | 25% | 84% | 65% | | - One | 14% | 6% | 5% | 18% | 15% | 17% | 20% | | - Two | 6% | 9% | 14% | 5% | 4% | 28% | 26% | | - Three | 22% | 12% | 9% | 8% | 1% | 3% | 8% | | - Four or more | 33% | 30% | 11% | 29% | 4% | 36% | 10% | | No significant barriers | 25% | 44% | 61% | 40% | 75% | 16% | 35% |

Based on the above analysis, there are significant variations in the type and extent of barriers experienced in different markets. Russia and China appear to be the most challenging markets, with the vast majority of firms (84% and 75% respectively) reporting at least one significant barrier.

Legal and regulatory issues and customs issues are very significant issues in Russia, with 58% reporting a significant difficulty in both these areas (compared to 37% across all markets for legal and regulatory and 24% for customs). It is also clear that initiating and building relationships can also be a major problem in Russia, with 38% reporting significant difficulties with contacts barriers (compared to 24% overall). It also appears that many firms are having difficulty finding basic information about the Russian market, with 26% experiencing this barrier (compared to 10% across all markets), suggesting a need for more widely available support in this area.

As with Russia, the most widespread barrier encountered in China is legal and regulatory (58%). Significant proportions of firms have also had problems with identifying and developing contacts (40%) and negotiating the language and culture (40%).

Interestingly, bias barriers (i.e. where firms in an overseas market demonstrate a preference for doing business with other firms from their own market) seem to be a particularly large problem in France (40%), and this is consistent with results seen in previous years. As seen below, in every type of market UKTI users are more likely to report significant barriers than non-users (although the difference is less pronounced, and not statistically significant, in high growth markets). This suggests that the greater incidence of barriers amongst users is not simply a reflection of the type of markets they do business in.

Table 13.1.14 Summary Barriers – By Market Type & UKTI Usage

| Types of Barriers | High Growth | EEA | Other | |-------------------|-------------|-----|-------| | | UKTI User | Non-User | UKTI User | Non-User | UKTI User | Non-User | | Base: All exporters | 60 | 201 | 47 | 268 | 71 | 185 | | Legal & regulatory | 52% | 47% | 28% | 25% | 44% | 36% | | Customs | 34% | 34% | 9% | 15% | 38% | 21% | | Contacts | 35% | 29% | 27% | 14% | 37% | 20% | | Information | 14% | 13% | 7% | 8% | 14% | 7% | | Resource | 14% | 20% | 20% | 9% | 23% | 15% | | Language & cultural | 23% | 23% | 19% | 11% | 19% | 11% | | Bias | 19% | 12% | 26% | 9% | 17% | 9% |

Number of Barriers

| At least one barrier | 74% | 68% | 64% | 41% | 77% | 51% | | - One | 20% | 17% | 26% | 13% | 13% | 16% | | - Two | 8% | 17% | 10% | 9% | 23% | 12% | | - Three | 14% | 9% | 9% | 7% | 16% | 10% | | - Four or more | 33% | 26% | 19% | 11% | 24% | 13% | | No significant barriers | 26% | 32% | 36% | 59% | 23% | 49% |

Similarly, when the analysis compares users and non-users that are active in a similar number of markets, UKTI users are still more likely to report significant barriers (although this difference is only significant for those active in 1-5 markets).

Table 13.1.15 Summary Barriers – By Number of Markets & UKTI Usage

| Types of Barriers | 1-5 markets | 6-10 markets | More than 10 markets | |-------------------|-------------|--------------|----------------------| | | UKTI User | Non-User | UKTI User | Non-User | UKTI User | Non-User | | Base: All exporters | 67 | 371 | 35 | 143 | 76 | 135 | | Legal & regulatory | 48% | 26% | 42% | 37% | 38% | 54% | | Customs | 21% | 17% | 31% | 26% | 34% | 33% | | Contacts | 29% | 17% | 34% | 23% | 37% | 26% | | Information | 11% | 7% | 14% | 10% | 12% | 12% | | Resource | 25% | 10% | 20% | 18% | 15% | 21% | | Language & cultural | 17% | 10% | 21% | 20% | 22% | 18% | | Bias | 13% | 8% | 28% | 9% | 17% | 15% |

Number of Barriers

| At least one barrier | 75% | 43% | 70% | 59% | 71% | 65% | | - One | 25% | 15% | 13% | 17% | 16% | 13% | | - Two | 16% | 11% | 17% | 14% | 12% | 14% | | - Three | 15% | 5% | 4% | 11% | 16% | 17% | | - Four or more | 19% | 12% | 36% | 18% | 28% | 22% | | No significant barriers | 25% | 57% | 30% | 41% | 29% | 35% | As seen below, there are no clear or consistent differences by age of firm within any of the 3 market types.

Table 13.1.16 Summary Barriers – By Market Type & Age

| Types of Barriers | High Growth | EEA | Other | |-------------------|-------------|-----|-------| | | Up to 5 yrs old | 6-10 yrs old | Over 10 yrs old | Up to 5 yrs old | 6-10 yrs old | Over 10 yrs old | | Base: All exporters | 67 | 76 | 118 | 86 | 87 | 142 | 62 | 72 | 122 |

Number of Barriers

| Number of Barriers | High Growth | EEA | Other | |--------------------|-------------|-----|-------| | At least one barrier | 72% | 72% | 68% | 43% | 49% | 43% | 52% | 54% | 62% | | - One | 16% | 25% | 15% | 14% | 11% | 17% | 18% | 13% | 16% | | - Two | 13% | 11% | 16% | 12% | 14% | 7% | 6% | 14% | 18% | | - Three | 10% | 13% | 8% | 12% | 10% | 6% | 10% | 8% | 14% | | - Four or more | 31% | 24% | 28% | 6% | 14% | 13% | 18% | 19% | 15% | | No significant barriers | 28% | 28% | 32% | 57% | 51% | 57% | 48% | 46% | 38% |

However, it does appear that experienced exporters are more likely to encounter barriers in EEA and ‘other’ markets, but there is no difference by export experience in high growth markets.

Table 13.1.17 Summary Barriers – By Market Type & Experience

| Types of Barriers | High Growth | EEA | Other | |-------------------|-------------|-----|-------| | | Exp. up to 2 yrs | Exp. 2-10 yrs | Exp. over 10 yrs | Exp. up to 2 yrs | Exp. 2-10 yrs | Exp. over 10 yrs | Exp. up to 2 yrs | Exp. 2-10 yrs | Exp. over 10 yrs | | Base: All exporters | 42 | 134 | 84 | 54 | 178 | 81 | 36 | 136 | 83 |

Number of Barriers

| Number of Barriers | High Growth | EEA | Other | |--------------------|-------------|-----|-------| | At least one barrier | 66% | 72% | 68% | 36% | 45% | 47% | 47% | 52% | 69% | | - One | 20% | 21% | 14% | 15% | 12% | 20% | 12% | 13% | 18% | | - Two | 16% | 12% | 17% | 7% | 11% | 7% | 8% | 14% | 19% | | - Three | 10% | 14% | 6% | 9% | 8% | 6% | 14% | 8% | 16% | | - Four or more | 19% | 25% | 31% | 5% | 13% | 14% | 13% | 16% | 16% | | No significant barriers | 34% | 28% | 32% | 64% | 55% | 53% | 53% | 48% | 31% | In each type of market, smaller firms with less than 10 employees appear least likely to encounter significant barriers. When interpreting the data below, the extremely low base sizes for firms with 250+ employees should be taken into account.

Table 13.1.18 Summary Barriers – By Market Type & Size

| Types of Barriers | High Growth | EEA | Other | |-------------------|-------------|-----|-------| | | 0-9 | 10-249 | 250+ | SME total | 0-9 | 10-249 | 250+ | SME total | 0-9 | 10-249 | 250+ | SME total | | Base: All exporters | 170 | 83 | 8 | 253 | 230 | 80 | 4 | 310 | 187 | 64 | 5 | 251 | | Legal & regulatory | 43% | 56% | 60% | 48% | 24% | 31% | 0% | 26% | 34% | 48% | 60% | 38% | | Customs | 31% | 41% | 19% | 35% | 13% | 15% | 25% | 14% | 22% | 33% | 60% | 25% | | Contacts | 30% | 33% | 19% | 31% | 15% | 18% | 50% | 15% | 19% | 43% | 20% | 26% | | Information | 9% | 15% | 46% | 12% | 7% | 8% | 50% | 7% | 7% | 14% | 0% | 9% | | Resource | 17% | 20% | 27% | 18% | 10% | 12% | 50% | 10% | 15% | 21% | 40% | 17% | | Language & cultural | 24% | 20% | 33% | 22% | 11% | 13% | 25% | 12% | 10% | 18% | 40% | 12% | | Bias | 14% | 10% | 0% | 13% | 11% | 13% | 50% | 11% | 7% | 20% | 20% | 11% |

At the total level, there are no significant differences between production and service sector firms, either in the proportion experiencing any significant barriers or by the types of barriers encountered. However, service sector firms are significantly more likely to encounter barriers in High Growth markets.

Table 13.1.19 Summary Barriers – By Market Type & Sector

| Types of Barriers | Total | High Growth | EEA | Other | |-------------------|-------|-------------|-----|-------| | | Prod. | Serv. | Prod. | Serv. | Prod. | Serv. | Prod. | Serv. | | Base: All exporters | 240 | 592 | 68 | 193 | 96 | 219 | 76 | 180 | | Legal & regulatory | 34% | 38% | 38% | 52% | 27% | 25% | 38% | 39% | | Customs | 22% | 25% | 33% | 35% | 14% | 14% | 24% | 27% | | Contacts | 20% | 25% | 22% | 34% | 16% | 16% | 24% | 26% | | Information | 10% | 10% | 14% | 13% | 11% | 6% | 6% | 10% | | Resource | 14% | 16% | 11% | 21% | 12% | 10% | 18% | 17% | | Language & cultural | 15% | 16% | 23% | 23% | 12% | 12% | 12% | 13% | | Bias | 11% | 12% | 9% | 13% | 15% | 11% | 8% | 12% |

At least one barrier 56% 57% 60% 73% 49% 42% 60% 59%

- One 18% 15% 19% 17% 16% 15% 21% 13%
- Two 14% 13% 13% 15% 14% 7% 13% 17%
- Three 9% 10% 10% 10% 8% 8% 11% 13%
- Four or more 15% 20% 19% 31% 11% 13% 15% 17% No sig. barriers 44% 43% 40% 27% 51% 58% 41% 41% 13.2 Barriers (Detailed)

13.2.1 Dealing with Legal or Tax Regulations & Standards (Legal & Regulatory Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 13.2.1 Dealing with Legal or Tax Regulations & Standards – By UKTI Usage

Dealing with legal or tax regulations and standards is one of the most widespread barriers, with over a fifth of firms (21%) experiencing it to a significant extent (i.e. 4 or 5 out of 5). Half of all internationalising firms (53%) reported at least some difficulties in this respect (i.e. 2-5 out of 5), with this more likely to be the case amongst UKTI users. 13.2.2 Protecting Your Intellectual Property (Legal & Regulatory Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 13.2.2.1 Protecting Your Intellectual Property – By UKTI Usage

Only 12% of firms reported a significant problem with protecting their intellectual property. However, it is clearly still an issue to at least some degree for a large number of firms, with 36% indicating that they had experienced at least some difficulties in this respect (i.e. 2-5 out of 5). As seen below, firms that hold some form of IP protection are more likely to highlight some level of difficulty in protecting their IP overseas (53% vs. 32%), and this of course may have prompted them to obtain the IP protection in the first place.

Table 13.2.2.1 Protecting Your Intellectual Property – By IP Activity

| IP Active | Yes | No | |-----------|-----|----| | Base: All exporters | 182 | 641 | | 5 – Extremely difficult | 8% | 7% | | 4 | 8% | 4% | | 3 | 14% | 9% | | 2 | 23% | 12% | | 1 – Not at all difficult | 43% | 64% | | Don’t know | 5% | 4% |

The fact that a third of those with no IP protection report some degree of difficulty in protecting their IP (i.e. give a score of 2-5 out of 5) suggests that some firms do not see any value in IP protection even though their IP assets are at risk. This is consistent with the findings of a recent qualitative project conducted for UKTI, which found that firms often adopted a fairly informal approach to assessing the risk of IP theft and protecting their IP. Firms often felt that there was not a great deal that they could (or should) do to overcome this risk beyond putting in place prominent terms and conditions in contracts, licence agreements, etc.

Those firms that had experienced difficulties protecting their IP were asked to give details of what this involved. As seen below, the biggest issue for firms is enforcing their IP protection, rather than obtaining the protection in the first place.

Chart 13.2.2.2 Specific IPP Problems Experienced

- Obtaining protection for your intellectual property: 6%
- Enforcing your intellectual property protection: 11%
- Neither of these: 8%
- No problems with intellectual property protection (1-2 out of 5): 73%

Base: All exporters (Base, Don’t know) Total (832, 5%).

______________________________________________________________________

7 The Risks Faced When Entering Overseas Markets And The Relationship Between Risks And Choice Of Mode (OMB Research, November 2011) 13.2.3 Ensuring You Get Paid & Enforcing Contracts (Legal & Regulatory Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 13.2.3 Ensuring You Get Paid & Enforcing Contracts – By UKTI Usage

Just over half of all internationalising firms (53%) reported at least some difficulty with getting paid and enforcing contracts, with 23% indicating it had been a significant difficulty (i.e. 4-5 out of 5). As with all the barriers, UKTI users were more likely to encounter this issue, although the proportion experiencing significant difficulties is similar for users and non-users.

It is worth noting that 49% of all firms have actively avoided doing business in a specific market due to the risk of not getting paid (as seen in Chapter 11.2). This suggests that the scale of this problem may be even greater than that recorded here, as the above data shows the proportion experiencing difficulties with this issue in their ‘most challenging’ market and does not take account of firms that have decided against entering markets because of concerns in this area. 13.2.4 Dealing with Customs Procedures & Paperwork (Customs Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 13.2.4 Dealing with Customs Procedures & Paperwork – By UKTI Usage

Around a quarter of internationalising firms (24%) have experienced significant difficulties with customs procedures, making it one of the most widely reported of the barriers tested. Furthermore, 55% of firms have had at least some problems in this respect (i.e. score 2-5 out of 5), with this proportion increasing to 67% amongst UKTI users. 13.2.5 Identifying Who to Make Contact With in the First Instance (Contacts Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 13.2.5 Identifying Who to Make Contact With in the First Instance – By UKTI Usage

Approaching half of all firms (45%) have experienced some level of difficulty with identifying initial contacts in their selected market, with this rising to 61% amongst UKTI users. This is consistent with other survey data that shows that a need to access suitable contacts is one of the major reasons for using UKTI support. 13.2.6 Establishing an Initial Dialogue with Prospective Customers or Partners (Contacts Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 13.2.6 Establishing an Initial Dialogue with Prospective Customers or Partners – By UKTI Usage

Half of firms (47%) have experienced some level of difficulty with establishing an initial dialogue with prospective customers or partners in the market in question, although only 12% indicated that this had been a significant problem (i.e. 4-5 out of 5). Once again, this was more likely to be an issue for UKTI users. 13.2.7 Building Relationships with Key Influencers or Decision Makers (Contacts Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 13.2.7 Building Relationships with Key Influencers or Decision Makers – By UKTI Usage

Overall, 13% of firms reported significant difficulties building relationships with key influencers or decision makers in an overseas market, but this rises to a fifth of UKTI users. Over half of all internationalising firms (52%) indicated that they had experienced at least some problems in this respect (i.e. 2-5 out of 5). 13.2.8 Obtaining Basic Information about Doing Business in the Market (Information Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 13.2.8 Obtaining Basic Information about Doing Business in the Market – By UKTI Usage

Only 10% of firms indicated that obtaining basic information about an overseas market had been a significant problem (i.e. 4-5 out of 5), making this the least prevalent of the barriers tested. However, it should be noted that over half (53%) reported that they had experienced at least some difficulty in this respect, highlighting the need for an organisation such as UKTI to help fill these knowledge gaps. The fact that UKTI users are more likely to report this barrier suggests that this can be a reason for firms approaching UKTI. 13.2.9 Finding the Necessary Management Time to Devote to Doing Business in the Market (Resource Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 13.2.9 Finding the Necessary Management Time to Devote to Doing Business in the Market – By UKTI Usage

Lack of time and resources is clearly a hindrance to the development of overseas business for many firms, with 54% indicating that they have had some difficulties in this respect (and 15% claiming that it has been a significant problem). Once again, users of UKTI are more likely to report this barrier, emphasising the importance of UKTI's role in helping firms target their often limited resources most effectively.

It is worth noting that this issue is not just confined to smaller firms, with 15% of larger firms with 50+ employees reporting significant difficulties in this regard. 13.2.10 Negotiating the Language & Culture (Language & Cultural Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 13.2.10 Negotiating the Language & Culture – By UKTI Usage

Overall, 16% of all internationalising firms have experienced significant problems with language or cultural differences in their most challenging market, with almost half (47%) reporting at least some difficulty in this regard (i.e. 2-5 out of 5). Again, this barrier is more likely to have been experienced by UKTI users. 13.2.11 A Preference on the Part of Customers in the Market for Doing Business with Other Firms from that Market (Bias Barrier)

The chart below shows the detailed breakdown of the extent to which firms have experienced this barrier in their chosen market. Analysis has been provided at the total level and by UKTI usage.

Chart 13.2.11 A Preference on the Part of Customers in the Market for Doing Business with Other Firms from that Market – By UKTI Usage

Approaching half of firms (44%) claim to have encountered bias issues to at least some extent (i.e. score 2-5 out of 5), with 12% indicating that it has been a significant barrier. As with all the barriers, UKTI users are more likely to have been affected in this way. 14. Marketing Channels

14.1 Usage & Usefulness

All respondents were asked whether they used various channels to obtain news or information that was relevant to their business. If they attended events or used social networking sites, they were then asked to rate the usefulness of these channels on a 1-5 scale (where 5 was ‘very useful’ and 1 was ‘not at all useful’). The chart below summarises these results, and provides comparative results from the 2011 Internationalisation Survey.

Chart 14.1.1 Usage & Usefulness of Marketing Channels

| Channel | Proportion using for business news/information (All firms) | Proportion rating as ‘useful’ (4-5 out of 5) (All using the channel) | |--------------------------------|-----------------------------------------------------------|---------------------------------------------------------------------| | Seminars, tradeshows or conferences | 61% | 54% | | Social networking sites | 42% | 42% | | Other websites | 75% | 71% | | | 65% | 60% |

Base: All respondents (Base, Don’t know) 2012 (900, 0%), 2011 (903, 0%) Base: All using channel (Base, Don’t know 2012 – Events (558, 0%), Networking (407, 1%) 2011 – Events (594, 0%), Networking (308, 1%)

Approaching two-thirds of internationalising firms have attended seminars, tradeshows or conferences in the last year, slightly down on the 65% recorded last year. The majority of firms that attend these types of event view them as being useful (54%).

However, use of social networking sites has increased significantly over the last year and currently stands at 42%. However, the perceived value of this channel varies, with less than half of users rating social networking sites as useful (i.e. 4-5 out of 5).

Three-quarters of internationalising firms use other websites as a source of business news or information. Younger firms are more likely to use social networking sites and also tend to view this channel as more useful than older firms. There is also some evidence that larger firms are more likely to attend seminars, conferences or tradeshows.

Table 14.1.1 Usage & Usefulness of Marketing Channels – By Age & Size

| Age (Years Trading) | Size (Number of Employees) | Proportion using channel | Proportion rating as useful (4-5 out of 5) | |---------------------|---------------------------|--------------------------|------------------------------------------| | | | Base: All firms | Base: All using | | | | Up to 5 | 164/148 | | | | 6-10 | 158/119 | | | | Over 10 | 236/140 | | | | 0-9 | 385/309 | | | | 10-49 | 124/69 | | | | 50-249 | 33/19 | | | | 250+ | 16/10 | | | | All SMEs | 542/397 | | | | Seminars, etc | | | | | 65% | 54% | | | | 62% | 61% | | | | 60% | 52% | | | | Social networking | | | | | 59% | 53% | | | | 47% | 42% | | | | Websites | | | | | 77% | 79% | | | | 79% | 73% | | | | 73% | 75% | | | | 75% | 73% | | | | 78% | 94% | | | | 94% | 75% | | | | Seminars, etc | | | | | 54% | 53% | | | | 61% | 42% | | | | 52% | 37% | | | | Social networking | | | | | 53% | 58% | | | | 42% | 40% | | | | Websites | | | | | 79% | 75% | | | | 75% | 74% | | | | 74% | 83% | | | | 83% | 72% | | | | 72% | 72% | | | | 72% | 82% |

Firms that are fairly new to overseas business and those operating in relatively few markets are most likely to be using social networking sites for business purposes, and also have a more positive view of their usefulness. This suggests that social networking could be an effective route to reaching firms at the point they are starting to develop overseas and hence may be in need of external guidance.

Table 14.1.2 Usage & Usefulness of Marketing Channels – By Experience

| Years Exporting | Number of Markets | Proportion using channel | Proportion rating as useful (4-5 out of 5) | |-----------------|-------------------|--------------------------|------------------------------------------| | | < 2 yrs | 2-10 yrs | > 10 yrs | | | 0 | 1-5 | 6-10 | 10+ | | Base: All firms | 200 | 448 | 248 | | | Seminars, etc | 67% | 59% | 62% | | | Social networking | 62% | 42% | 33% | | | Websites | 79% | 75% | 74% | | | Base: All using | 138/128 | 266/195 | 153/83 | | | Seminars, etc | 53% | 57% | 52% | | | Social networking | 58% | 40% | 33% | | As seen below, innovative and IP active firms are more likely to use each of these channels, and this difference is particularly evident when it comes to attendance at seminars, tradeshows and conferences. However, there is relatively little difference in the perceived usefulness of these channels by whether or not firms are innovative or IP active.

Table 14.1.3 Usage & Usefulness of Marketing Channels – By Innovation

| Proportion using channel | Innovative | IP Active | |--------------------------|------------|-----------| | Base: All firms | | | | Proportion using channel | | | | Base: All firms | 402 | 663 | | Seminars, etc | 69% | 68% | | Social networking | 50% | 46% | | Websites | 81% | 79% | | Proportion rating as useful (4-5 out of 5) | | | | Base: All using | 283/207 | 450/319 | | Seminars, etc | 55% | 55% | | Social networking | 44% | 42% |

The more ambitious a firm’s growth objectives, the more likely they are to attend events and use social networking for business purposes, and this is particularly true of innovative high growth firms. However, there is no real evidence that growing firms place any more value on these channels (in terms of their usefulness as a source of business news or information).

Table 14.1.4 Usage & Usefulness of Marketing Channels – By Innovation & Growth

| Proportion using channel | Growth Objectives | Innovation & Growth | Non-innovative | |--------------------------|-------------------|---------------------|----------------| | Base: All firms | Stay same | Moderate growth | Substantial growth | Expect substantial growth | Other | | Seminars, etc | 40% | 62% | 75% | 80% | 62% | | Social networking | 30% | 40% | 53% | 55% | 42% | | Websites | 71% | 77% | 77% | 82% | 77% | | Proportion rating as useful (4-5 out of 5) | | | | Base: All using | 49/38 | 290/205 | 204/153 | 172/124 | 278/195 | | Seminars, etc | 55% | 57% | 51% | 52% | 57% | | Social networking | 50% | 38% | 45% | 46% | 40% | 14.2 Social Networking Sites

As seen previously, 42% of firms indicated that they currently used social networking sites as a source of business information or news. Those that did not already use these sites for business purposes were asked whether they expected to do so in the next year.

Chart 14.4.1 Whether Expect to Use Social Networking Sites for Business Purposes in the Next Year

| | Yes | No | Don't know | |----------------|-----|----|------------| | Already use social networking for business news or info | 42% | 17% | 1% |

Base: All respondents (Base) (900)

In addition to the 42% of respondents that already use social networking sites for business purposes, a further 17% plan to start doing so in the next year.

As seen below, as well as being least likely to currently use social networking sites, older firms established for more than 10 years are also less inclined to start using them in the next year. There are no consistent differences by size of firm in this respect.

Table 14.4.1 Whether Expect to Use Social Networking Sites for Business Purposes in the Next Year – By Age & Size

| | Age (Years Trading) | Size (Number of Employees) | All SMEs | |----------------|---------------------|-----------------------------|----------| | | Up to 5 | 6-10 | Over 10 | 0-9 | 10-49 | 50-249 | 250+ | All SMEs | | Base | 253 | 255 | 392 | 644 | 192 | 46 | 17 | 882 | | Yes | 18% | 20% | 15% | 16% | 19% | 22% | 12% | 17% | | No | 23% | 33% | 48% | 39% | 48% | 34% | 27% | 41% | | Don't know | 1% | 1% | 1% | 1% | 0% | 2% | 0% | 1% | | Already use | 59% | 47% | 36% | 45% | 33% | 41% | 61% | 42% | | Net: Use/plan to use | 76% | 66% | 51% | 61% | 52% | 63% | 73% | 59% | Firms that have started exporting more recently are most open to the idea of using social networking sites, with 80% either using them already or planning to do so in the next year. Interest in social networking sites is particularly pronounced amongst those that are not yet exporting at all.

Table 14.4.2 Whether Expect to Use Social Networking Sites for Business Purposes in the Next Year – By Experience

| Years Exporting | Number of Markets | 0 | 1-5 | 6-10 | 10+ | |-----------------|-------------------|---|-----|------|-----| | < 2 years | | 68 | 438 | 178 | 211 | | 2-10 years | | 28%| 15% | 17% | 17% | | > 10 years | | 15%| 43% | 46% | 39% | | Base | | 18%| 17% | 17% | 17% | | Yes | | 16%| 18% | 18% | 18% | | No | | 41%| 48% | 48% | 48% | | Don't know | | 0% | 1% | 1% | 1% | | Already use | | 57%| 41% | 37% | 43% | | Net: Use/plan to use | | 85%| 57% | 54% | 61% |

Around two-thirds of innovative and IP active firms use social networking sites or expect to do so in the next year (compared to 46% of non-innovative firms).

Table 14.4.3 Whether Expect to Use Social Networking Sites for Business Purposes in the Next Year – By Innovation

| Innovative | IP Active | |------------|-----------| | Yes (alternative) | Yes | No | Yes | No | | Base | 402 | 663 | 237 | 193 | 698 | | Yes | 17% | 17% | 15% | 18% | 16% | | No | 32% | 36% | 53% | 30% | 43% | | Don't know | 1% | 1% | 0% | 1% | 1% | | Already use| 50% | 46% | 31% | 51% | 40% | | Net: Use/plan to use | 67% | 63% | 46% | 69% | 56% |

The more ambitious a firm’s growth objectives are, the more likely they are to be using or planning to use social networking sites for business purposes.

Table 14.4.4 Whether Expect to Use Social Networking Sites for Business Purposes in the Next Year – By Innovation & Growth

| Growth Objectives | Innovation & Growth | |-------------------|---------------------| | Stay same | Innovative | | Moderate growth | Expect substantial growth | Other | | Substantial growth| | Non-innovative | | Base | 123 | 476 | 272 | 214 | 449 | 237 | | Yes | 11% | 18% | 20% | 21% | 16% | 15% | | No | 59% | 41% | 27% | 24% | 41% | 53% | | Don't know | 1% | 1% | 0% | 0% | 1% | 0% | | Already use | 30% | 40% | 53% | 55% | 42% | 31% | | Net: Use/plan to use | 41% | 58% | 73% | 76% | 58% | 46% | Annex A: Markets Selected

A.1 Most Recent Market

Firms were asked to give details of the overseas market that they had entered most recently, and were then asked about their motivations for entering this market and the research/preparation they undertook before doing so (as reported in Chapter 12). The table below gives details of the most recently entered markets, shown separately for users and non-users of UKTI.

| Market | Total | UKTI User | Non-User | |-------------------------|-------|-----------|----------| | **Base: All exporting** | 832 | 178 | 654 | | USA | 9% | 7% | 9% | | Ireland (Republic) | 8% | 3% | 9% | | Germany | 5% | 2% | 7% | | China | 5% | 7% | 4% | | Australia | 4% | 3% | 5% | | France | 4% | 2% | 5% | | Spain | 4% | 4% | 4% | | UAE | 3% | 3% | 3% | | Russia | 3% | 3% | 3% | | Netherlands | 3% | 2% | 3% | | Italy | 3% | 2% | 3% | | India | 3% | 2% | 3% | | Sweden | 3% | 1% | 3% | | Turkey | 2% | 5% | 2% | | Poland | 2% | 1% | 3% | | Brazil | 2% | 2% | 2% | | Canada | 2% | 1% | 2% | | Belgium | 2% | 1% | 2% | | Saudi Arabia | 2% | 2% | 1% | | South Africa | 1% | 2% | 1% | | Norway | 1% | 2% | 1% | | Singapore | 1% | 3% | 1% | | North America | 1% | 2% | 1% | | Greece | 1% | 1% | 1% | | Malaysia | 1% | 2% | 1% | | Finland | 1% | 0% | 1% | | Mexico | 1% | 1% | 1% | | Japan | 1% | 1% | 1% | | Kenya | 1% | 1% | 1% | | Nigeria | 1% | 1% | 1% | | Hong Kong | 1% | 0% | 1% |

| Market | Total | UKTI User | Non-User | |-------------------------|-------|-----------|----------| | **Base: All exporting** | 832 | 178 | 654 | | Chile | 1% | 1% | 1% | | Czech Republic | 1% | 2% | 1% | | Denmark | 1% | 1% | 1% | | Israel | 1% | 1% | 1% | | New Zealand | 1% | 1% | 1% | | Qatar | 1% | 0% | 1% | | South Korea | 1% | 0% | 1% | | Switzerland | 1% | 0% | 1% | | Cyprus | 1% | 0% | 1% | | Middle East | 1% | 1% | 1% | | Ghana | 1% | 2% | 0% | | Portugal | 1% | 1% | 1% | | Austria | 0% | 1% | 0% | | Iceland | 0% | 0% | 1% | | Lithuania | 0% | 1% | 0% | | Kuwait | 0% | 1% | 0% | | Egypt | 0% | 2% | 0% | | Jordan | 0% | 2% | 0% | | Libya | 0% | 1% | 0% | | Tanzania | 0% | 1% | 0% | | Sudan | 0% | 1% | 0% | | Belarus | 0% | 1% | 0% | | Central Africa | 0% | 1% | 0% | | Equatorial Guinea | 0% | 1% | 0% | | Estonia | 0% | 1% | 0% | | Gibraltar | 0% | 1% | 0% | | Lebanon | 0% | 1% | 0% | | Pakistan | 0% | 1% | 0% | | Tunisia | 0% | 1% | 0% | | Uganda | 0% | 1% | 0% | | Venezuela | 0% | 1% | 0% | A.2 Most Challenging Market

Firms were also asked to identify the most challenging overseas market that they had done business in, and were then asked various questions about their motivations for entering this market, their use of external support about it, and the barriers they had experienced (as reported in Chapters 12 and 13). The table below gives details of the markets selected as being the ‘most challenging’, shown separately for users and non-users of UKTI.

Table A.2 Most Challenging Market – By UKTI Usage

| Market | Total | UKTI User | Non-User | |-------------------------|-------|-----------|----------| | Base: All exporting | 832 | 178 | 654 | | Ireland (Republic) | 8% | 3% | 9% | | China | 7% | 8% | 6% | | USA | 7% | 6% | 7% | | Russia | 6% | 5% | 6% | | France | 5% | 5% | 6% | | India | 4% | 4% | 5% | | Germany | 4% | 1% | 6% | | Italy | 3% | 4% | 3% | | Saudi Arabia | 3% | 4% | 3% | | UAE | 3% | 2% | 3% | | Spain | 3% | 3% | 3% | | Australia | 3% | 1% | 3% | | Nigeria | 2% | 5% | 2% | | South Africa | 2% | 2% | 2% | | Netherlands | 2% | 1% | 2% | | Turkey | 2% | 4% | 1% | | Sweden | 2% | 1% | 2% | | Poland | 2% | 1% | 2% | | Brazil | 1% | 2% | 1% | | Belgium | 1% | 1% | 1% | | Portugal | 1% | 1% | 1% | | Middle East | 1% | 2% | 1% | | Singapore | 1% | 2% | 1% | | Japan | 1% | 1% | 1% | | Kenya | 1% | 2% | 1% | | Egypt | 1% | 1% | 1% | | Switzerland | 1% | 0% | 1% | | Israel | 1% | 1% | 1% | | Canada | 1% | 1% | 1% |

| Market | Total | UKTI User | Non-User | |-------------------------|-------|-----------|----------| | Base: All exporting | 832 | 178 | 654 | | Malaysia | 1% | 2% | 1% | | North America | 1% | 1% | 1% | | Chile | 1% | 1% | 1% | | Greece | 1% | 2% | 1% | | Denmark | 1% | 1% | 1% | | Pakistan | 1% | 0% | 1% | | Lithuania | 1% | 1% | 1% | | New Zealand | 1% | 1% | 1% | | Ukraine | 1% | 2% | 0% | | Finland | 1% | 1% | 1% | | Czech Republic | 1% | 1% | 0% | | Austria | 1% | 1% | 1% | | South Korea | 1% | 0% | 1% | | Romania | 1% | 0% | 1% | | Africa | 0% | 1% | 0% | | Norway | 0% | 0% | 1% | | Mexico | 0% | 1% | 0% | | Iceland | 0% | 0% | 1% | | Qatar | 0% | 0% | 1% | | Angola | 0% | 2% | 0% | | Libya | 0% | 1% | 0% | | Syria | 0% | 1% | 0% | | Venezuela | 0% | 1% | 0% | | Hong Kong | 0% | 1% | 0% | | Belarus | 0% | 1% | 0% | | Estonia | 0% | 1% | 0% | | Macau | 0% | 1% | 0% | | Mauritania | 0% | 1% | 0% | | Tunisia | 0% | 1% | 0% | Annex B: Questionnaire OMB RESEARCH LIMITED UKTI – International Business Strategies, Barriers & Awareness Survey 2012 Questionnaire March-May 2012

QUOTAS (900 INTERVIEWS): • 250 interviews with firms 0-5 years old • 250 interviews with firms 6-10 years old • 400 interviews with firms more than 10 years old • All quotas to run from questionnaire (S7)

INTRO

ASK ALL Could I please speak to either the owner or someone responsible for your firm’s strategy in relation to overseas business?

Good morning/afternoon, my name is … and I am calling on behalf of OMB Research, an independent market research agency. We have been commissioned by UK Trade & Investment and the Department for Business, Innovation & Skills (BIS) to conduct a survey of businesses on the topic of doing business overseas.

IF NECESSARY We are interested in talking to firms who are either involved in any form of overseas business activity or who are seriously considering doing business overseas in the next year. This overseas business activity could include selling directly to customers based overseas, selling overseas through agents or distributors, licensing, franchising or joint venturing overseas, or operating your own overseas office or site.

INTERVIEWER NOTE - YOU MAY TAKE REFERRALS TO ANOTHER SITE WITHIN THE UK.

INTERVIEWER NOTE – IF FIRM IS NOT CURRENTLY DOING BUSINESS OVERSEAS, BUT PLANNING DOING SO WITHIN THE NEXT YEAR CONTINUE WITH THE INTERVIEW ON THIS BASIS

READ OUT TO ALL This research will cover areas such as your current and planned overseas activities, including the way you go about doing business overseas and any issues you may have faced. It will take around 15-20 minutes, depending on your answers. It doesn't matter how much or how little overseas business you do – we're interested in speaking to a range of firms about their experiences.

AS NECESSARY: UKTI is responsible for helping UK firms do business overseas. They want to find out more about how firms are going about overseas business and any difficulties they have. This will help UKTI develop the type of help they offer to UK firms.

AS NECESSARY: We are able to offer all businesses taking part in this research an electronic link to a summary report of the research findings (which will be available later this year) Is it convenient to speak to you now or would you prefer to make an appointment for another time?

ADD IF NECESSARY

- The research is being conducted under the Code of Practice of the Market Research Society, which means that all of the answers you give are strictly confidential and anonymous. Participation in this survey is voluntary.
- The responses of all organisations taking part will be combined into a statistical report.
- Your organisation was selected at random from a list of UK businesses held by a commercial list broker.
- If you wish to check that OMB Research is a bona fide market research agency, you can contact the Market Research Society on 0500 396999, or call James Murray at OMB Research on 01732 220582 or Heather Booth di Giovanni at UK Trade & Investment on 020 7215 4989.

OFFER EMAIL/FAX REASSURANCE IF NECESSARY

ASK ALL

S1 – Can I confirm that you are one of the people best qualified to talk about your company’s overseas business activity?

INTERVIEWER NOTE: IF KNOW ALREADY THAT YOU ARE SPEAKING TO THE CORRECT PERSON THEN CODE YES AUTOMATICALLY

REFERRALS CAN BE TAKEN TO ANY UK SITE WHEN THE CONTACT FEELS THAT THERE IS SOMEONE WITHIN THE COMPANY BETTER PLACED TO ANSWER QUESTIONS ON THE TOPIC AREAS OUTLINED

Yes .................................................................................. 1 No – take referral and being transferred .......................... 2 No – take referral and arrange call back ....................... 3 No – refused referral ......................................................... 4

CATI TO INSERT TIME MARKER

ASK ALL

S11 – Is your organisation...? READ OUT. SINGLE CODE

A business..................................................................................1 A trade association.................................................................2 – CLOSE Or, a public sector organisation such as a Government department, local council, etc...........................................3 – CLOSE Other (SPECIFY)......................................................................4 (Don’t know) ...........................................................................5 OVERSEAS BUSINESS ACTIVITY

ASK ALL S2a – Which of the following overseas business activities has your firm been involved in, over the last 5 years? READ OUT – MULTICODE ALLOWED – DO NOT RANDOMISE

AS NECESSARY: Please only include overseas sites if you have some responsibility or control over them from the UK. Do not include sites or companies operated by your parent company or other group companies.

- Selling directly to overseas customers ........................................ 1
- Selling to overseas customers through agents or distributors..... 2
- Licensing or franchising overseas, or other contractual arrangements such as joint ventures ......................................................... 3
- Operating your own overseas site or office ................................. 4
- (None of these) ............................................................................ 5
- (Don’t know) ................................................................................ 6 – CLOSE

S9a/b/c – DELETED

IF NONE AT S2a (CODE 5) S2b – Are you seriously considering starting to conduct overseas business via any of these routes in the NEXT YEAR?

- Yes .............................................................................................. 1
- No ................................................................................................ 2 - CLOSE
- (Don’t know) ................................................................................ 3 - CLOSE

IF JUST CONSIDERING OVERSEAS BUSINESS (CODE 1 AT S2b) S2c – Which of the following overseas business activities are you planning to become involved in, in the next year? READ OUT – MULTICODE ALLOWED – DO NOT RANDOMISE

- Selling directly to overseas customers ........................................ 1
- Selling to overseas customers through agents or distributors..... 2
- Licensing or franchising overseas, or other contractual arrangements such as joint ventures ......................................................... 3
- Operating your own overseas site or office ................................. 4
- (None of these) ............................................................................ 5 – CLOSE
- (Don’t know) ................................................................................ 6 – CLOSE

ASK IF EXPORT (CODES 1-4 AT S2a) S10a – And do you make any sales directly through your website when doing business overseas?

AS NECESSARY: By this I mean sales where the customer places an order on your website and you don’t have any other direct contact with them other than sending email confirmation, etc.

- Yes .............................................................................................. 1
- No ................................................................................................ 2
- (Don’t know) ................................................................................ 3 IF SELL THROUGH WEBSITE (CODE 1 AT S10a) & ONLY SELL DIRECT (CODE 1 AT S2a & NOT CODES 2-5 AT S2a)

S10b – And do you only sell to overseas customers directly through your website, or do you sometimes get orders in other ways (e.g. over the phone, face to face, responding to tenders, etc)?

Only sell through the website ...................................................... 1 Use other ways as well................................................................. 2 (Don’t know) ............................................................................. 3

IF HAVE OVERSEAS SITE (CODE 4 AT S2a)

S5b – How many overseas sites do you have? READ OUT

One................................................................................... 1 2-5 .................................................................................... 2 6-10 .................................................................................. 3 11-20 ................................................................................ 4 21-50 ................................................................................ 5 More than 50 ....................................................................... 6 (Don’t know) ........................................................................ 7 (Refused)............................................................................. 8

OVERALL FILTER FOR S5c: IF HAVE OR PLANNING OVERSEAS SITE (CODE 4 AT S2a OR CODE 4 AT S2c)

IF HAVE JUST ONE OVERSEAS SITE (CODE 1 AT S5b)

S5c – Would you say that the MAIN purpose of this site is…? READ OUT – AIM FOR SINGLE CODE BUT MULTI ALLOWED

IF HAVE MORE THAN ONE OVERSEAS SITE (CODES 2-8 AT S5b)

S5c – Thinking about all of your overseas sites, do any of these have the following purposes? READ OUT – CODE ALL THAT APPLY

IF PLANNING OVERSEAS SITE (CODE 4 AT S2c)

S5c – < IF CODE 4 AT S2c & CODES 1, 2 OR 3 ALSO MENTIONED AT S2c You mentioned operating your own overseas office or site. > Would you say that the MAIN purpose of this site will be…? READ OUT – AIM FOR SINGLE CODE BUT MULTI ALLOWED

Manufacturing or assembly ............................. 1 Call centre ................................................................. 3 Distribution or sales office ............................... 4 Service delivery ..................................................... 6 Research, product or process development.... 7 (Don’t know/None of these)................................. 8 – CLOSE IF ONLY CODE 4 AT S2a/S2c ((S2a=4 & S2a=Not 1, 2 OR 3) OR (S2a=5 & S2c=4 & S2c=Not 1, 2 or 3)) IF EXPORT & HAVE MANUFACTURING/CALL CENTRE/R&D SITE (CODES 1-4 AT S2a & CODES 1,3 OR 7 AT S5c) S5d And \<IF S5b=1 does this overseas site/IF S5b=2-8 do these overseas sites> sell to or supply...? READ OUT – SINGLE CODE

Internal customers, by which I mean other sites or companies that are owned by or affiliated to your firm .............................................. 1 External customers, by which I mean those that are not connected to your company ................................................................. 2 Or, both ........................................................................................................ 3 (Don't know) .......................................................................................... 4

IF SELL TO EXTERNAL CUSTOMERS (CODES 2-3 AT S5d) S5e And are any of these external customers located...? READ OUT – CODE ALL THAT APPLY

In the UK ............................................................................................ 1 In the same country as your overseas site ......................................... 2 In other overseas countries ................................................................ 3 (Don't know/None of these) ................................................................. 4

IF ONLY ACTIVITY IS OVERSEAS SITE & ONLY SELL TO INTERNAL OR UK CUSTOMERS ((CODE 4 AT S2a & NOT CODES 1-3 AT S2a) & (CODE 1 AT S5d OR (CODE 1 AT S5e & NOT CODES 2-4 AT S5e))) A5a – Can I just check, have you made any sales at all to customers in overseas countries in the last year?

Yes ............................................................................................. 1 No ............................................................................................... 2 (Don't know) ............................................................................... 3

ASK ALL S6a – And can I just check, < IF CODE 1 OR 3 at S5d other than from the overseas site that you've just mentioned > have you imported any goods or services into the UK over the last 5 years?

AS NECESSARY By importing I mean buying in goods or services from overseas suppliers. This includes having goods manufactured for you overseas.

Yes ............................................................................................. 1 No ............................................................................................... 2 (Don't know) ............................................................................... 3

IF CODE 1 AT S6a From now on, when I'm asking questions about your overseas business activity please DO NOT include importing \<IF S5d=1 OR 3, other than through your own overseas site(s)> ASK ALL S7 – How long ago was your business established in the UK? READ OUT AS NECESSARY

AS NECESSARY – THIS MEANS WHEN THE BUSINESS IN ITS CURRENT FORM STARTED TRADING

AS NECESSARY – IF THE BUSINESS IS A SUBSIDIARY THIS REFERS TO THE SUBSIDIARY IN WHICH YOU WORK

Within the last year ........................................................... 1 Over 1, up to 2 years ago .................................................. 2 Over 2, up to 3 years ago .................................................. 3 Over 3, up to 4 years ago .................................................. 4 Over 4, up to 5 years ago .................................................. 5 Over 5, up to 10 years ago ............................................... 6 Over 10, up to 20 years ago ............................................. 7 Over 20 years ago ............................................................ 8 (Not yet trading) ................................................................ 9 (Don’t know) ..................................................................... 10 - CLOSE (Refused) .......................................................................... 11 – CLOSE

ASK IF ESTABLISHED 1-2 YEARS (CODES 1-2 AT S7) S7b – Can I just check, has your business actually started trading yet?

Yes ................................................................................... 1 No .................................................................................... 2 (Don’t know) ..................................................................... 3

ASK ALL H1b – Is the business UK or foreign-owned?

UK-owned ......................................................................... 1 Foreign-owned ................................................................. 2 (Joint UK and foreign-owned) ........................................... 3 (Don’t know) ..................................................................... 4

READ OUT IF FOREIGN OWNED (CODES 2-3 AT H1b) For the rest of this interview, please just answer about the firm where you work, and not your parent company or any other group companies. So when I ask about your overseas business, please just focus on the overseas activities of your UK firm.

S8 - DELETED ASK IF CODES 1-4 AT S2a UNLESS NOT YET TRADING OR ESTABLISHED \<1 YEAR (CODES 1 OR 9 AT S7 OR CODE 2 AT S7b)

A4 – And how long ago did your company start conducting business overseas? READ OUT AS NECESSARY. CATI TO ONLY SHOW FEASIBLE CODES BASED ON ANSWER TO S7

IF IMPORTER (CODE 1 AT S6a & A5a IS NOT 2-3) AS NECESSARY: By this I mean when did you start selling overseas, so please do not include importing.

IF FOREIGN OWNED (CODES 2-3 AT H1b): AS NECESSARY: Please just focus on your UK firm, not your parent company

INTERVIEWER NOTE: IF RESPONDENT SAYS THEY’VE NOT YET STARTED DOING BUSINESS OVERSEAS THEN YOU NEED TO GO BACK TO S2a AND CHANGE TO ‘NONE OF THESE’ & THEN ASK S2b & S2c

Within the last year........................................................... 1 Over 1, up to 2 years ago.................................................. 2 Over 2, up to 3 years ago.................................................. 3 Over 3, up to 4 years ago.................................................. 4 Over 4, up to 5 years ago.................................................. 5 Over 5, up to 10 years ago............................................... 6 Over 10, up to 20 years ago............................................. 7 Over 20 years ago............................................................ 8 (Don’t know) ....................................................................................... 10 (Refused)......................................................................................... 11

ASK IF EXPORTING MORE THAN 2 YEARS (A4=3-11) UNLESS CODES 2-3 AT A5a

A15 – Since this time, have you had overseas sales every year or have there been some years where you haven’t made any sales at all to overseas customers?

Overseas sales every year (since started doing business overseas). 1 Some years with no overseas sales........................................... 2 (Don’t know) ......................................................................................... 3 ASK IF EXPORTING (CODES 1-4 AT S2a) BUT DO NOT ASK IF CODES 2-3 AT A5a OR CODE 9 AT S7 OR CODE 2 AT S7b)

A5c – In the last financial year, approximately what percentage of your turnover was accounted for by overseas sales? <IF S2a=4 Please include sales made by the overseas sites or subsidiaries that you control from the UK.> READ OUT AS NECESSARY

IF CODE 3 AT S2a AS NECESSARY: Please include any fees received from overseas licensing or franchising deals.

IF FOREIGN OWNED (CODES 2-3 AT H1b): AS NECESSARY: Please just focus on your UK firm, not your parent company

Up to 5% ................................................................................. 1 6 - 10% .................................................................................. 2 11 - 15% .................................................................................. 3 16 – 25% .................................................................................. 4 26 – 50% .................................................................................. 5 51 – 75% .................................................................................. 6 More than 75% ........................................................................ 7 (No overseas sales in last year) ........................................... 10 (Don't know) ........................................................................... 8 (Refused) ................................................................................ 9

ASK IF EXPORTING (CODES 1-4 AT S2a) A5d – In 3 years time, do you think that the percentage of your turnover accounted for by overseas sales will be higher than it is now, lower or about the same?

Higher .................................................................................. 1 Lower ...................................................................................... 2 About the same ....................................................................... 3 (Don't know) ........................................................................... 4 (Refused) ................................................................................ 5

ASK IF EXPORTING (CODES 1-4 AT S2a) G5 – Which of the following regions of the world have you done business in \<IF CODES 5-8 AT S7 over the last 5 years / IF CODES 1-4 OR 9 since your were established>? < IF IMPORTER (CODE 1 AT S6a & A5a IS NOT 2-3) (but please DO NOT include countries that you have only imported from)> READ OUT. CODE ALL THAT APPLY

IF FOREIGN OWNED (CODES 2-3 AT H1b): AS NECESSARY: Please just answer about the areas where your UK firm is doing business, but don’t include the activity of your parent company or any other group companies

Europe, other than the UK.................................................. 1 North America ................................................................. 3 South America or Latin America...................................... 4 The Middle East or Africa............................................... 6 Asia Pacific ......................................................................... 7 (Don't know) ....................................................................... 9 ASK IF CODES 1-4 AT S2a A1b – How many overseas countries have you done business in < IF CODES 5-8 AT S7 over the last 5 years / IF CODES 1-4 OR 9 since your were established >, in any form < IF IMPORTER (CODE 1 AT S6a) (although please DO NOT include countries that you have only imported from)>? READ OUT

One................................................................................... 2 2-5 .................................................................................... 3 6-10 .................................................................................. 4 11-20 ................................................................................ 5 21-50 ................................................................................ 6 More than 50 ...................................................................... 7 (Don’t know) ........................................................................ 8 (Refused)............................................................................. 9

IF CODE 2 AT A1b A2 – Which country was this? WRITE IN

CATI TO SHOW LIST OF MOST COMMON MARKETS, PLUS: Other (SPECIFY) .............................................................. (Don’t know) - CLOSE

ASK IF CURRENTLY EXPORTING (S2a=1-4) G7 – Over the next 3 years do you expect the number of countries in which you do business to increase, decrease or stay the same?

Increase............................................................................. 1 Decrease ............................................................................ 2 Stay the same .................................................................... 3 (Don’t know) ...................................................................... 4 READ OUT TO ALL I'm now going to ask you about the extent to which you see there being opportunities for YOUR FIRM in some of the world's fast growing and emerging economies over the next 2 years.

ASK ALL G1 – For each of these countries please could you tell me whether you are already doing business there, you are very likely to, you are quite likely to, or you are unlikely to do business there in the next 2 years.

IF IMPORTER (CODE 1 AT S6a) AS NECESSARY: I'm interested in the likelihood of you selling to these countries, so please do not answer in relation to imports.

So firstly, ... DO NOT ROTATE ORDER

a) Russia b) Turkey c) South Africa d) The United Arab Emirates ej) Saudi Arabia f) Brazil g) Mexico h) China i) India

AS NECESSARY Are you...?

Already doing business there ........................................... 1 Very likely ................................................................. 2 Quite likely ............................................................... 3 Or, unlikely to do business there in the next 2 years....... 4 (Don't know) ............................................................. 5

G4b - DELETED

HIGH GROWTH MARKET ALLOCATION: IF UNLIKELY TO DO BUSINESS IN ONE OR MORE HIGH GROWTH MARKETS (CODE 1 AT ANY OF G1a-i)

• .......................................................................................................................... FIR MS TO BE ALLOCATED ONE OF THE MARKETS THEY ARE UNLIKELY TO ENTER AT G1 (I.E. CODE 4). • .......................................................................................................................... CA TI TO SELECT THE MARKET (OF THOSE WHERE G1=4) AT RANDOM. ASK IF ‘UNLIKELY’ (CODE 4) AT ANY OF G1a-j

G11 – You indicated that you are unlikely to do business in <INSERT SELECTED MARKET> in the next two years. Is this for any of the following reasons...? READ OUT. CODE ALL THAT APPLY. RANDOMISE ORDER.

INTERVIEWER NOTE: Pause after reading each option to let the respondent say yes or no.

There is little or no demand for your products or services there ....1 You are focussing on opportunities in other countries instead.......2 It would be too difficult to do business there.................................3 It would be too risky to do business there ....................................4 You’ve never thought about doing business there .........................5 (None of these).............................................................................6 (Don’t know) ................................................................................7

ASK IF NONE OF THESE (CODE 6 AT G11)

G12 – You indicated that none of these reasons really apply to you, so what is the main reason that you are not likely to do business in <MARKET> over the next few years? RECORD VERBATIM.

.................................................................................................................... ....................................................................................................................

CATI TO INSERT TIME MARKER ASK ALL A17a – Moving on, is there anyone in the senior management team of your company who had significant experience of doing business overseas before they joined your firm?

Yes ................................................................................... 1 No ..................................................................................... 2 (Don’t know) ................................................................. 3

A17b - DELETED

ASK ALL A21 – Would you say that your senior management team has a clear strategy for developing your firm’s overseas business? IF YES, PROBE FOR WHETHER VERY OR FAIRLY CLEAR

Yes – very clear strategy .................................................. 1 Yes – fairly clear strategy ................................................. 2 No ..................................................................................... 3 (Don’t know) ..................................................................... 4 (Not aiming to develop our overseas business) ............... 5

IF DOING BUSINESS IN MORE THAN ONE MARKET (A1b=3-9) A22 – Which overseas country have you started doing business in most recently? RECORD ONE COUNTRY ONLY – DO NOT ALLOW ‘DON’T KNOW’

IF NOT SURE ASK RESPONDENT TO JUST CHOOSE ONE OF THE COUNTRIES THAT THEY DO BUSINESS IN (E.G. THE ONE THEY KNOW MOST ABOUT)

CATI TO SHOW LIST OF MOST COMMON MARKETS, PLUS: Other (SPECIFY) ..............................................................

ASK IF CURRENTLY EXPORTING (S2a=1-4) A23 – When you first decided to investigate \<IF A1b = 3-9 INSERT MARKET FROM A22 / IF A1B = 2 INSERT MARKET FROM A2>, was this mainly prompted by an enquiry from a potential customer or because you’d identified that there may be opportunities for your business there or because you already had contacts there? SINGLE CODE

INTERVIEWER NOTE: If the respondent mentions more than one of these reasons then probe for which of these was the main reason

INTERVIEWER NOTE: Sales through the firm’s website would count as ‘enquiries from customers’

Enquiry from customer ..................................................... 1 Identified that may be opportunities ................................ 2 Already had contacts there ............................................. 3 (Don’t know/Can’t remember) ........................................... 4 ASK IF CURRENTLY EXPORTING (S2a=1-4) A24 – And when you were deciding whether or not to enter < IF A1b = 3-9 INSERT MARKET FROM A22 / IF A1B = 2 INSERT MARKET FROM A2>, did you do any of the following? READ OUT. CODE ALL THAT APPLY

INTERVIEWER NOTE: Pause after reading each option to let the respondent say yes or no.

Conduct a market analysis to identify its potential or the risks involved .................. 1 Research the business environment and ways of working in that market ............... 2 Pay an external organisation for any information or assistance about the market... 3 (None of these) ........................................................................................................ 4 (Don't know) ............................................................................................................. 5

ASK IF CURRENTLY EXPORTING TO >1 MARKET (S2a=1-4 & A1b=3-9) A25 – Now thinking about any other countries that you’ve started doing business in over the last few years, was this generally prompted by enquiries from potential customers or because you’d identified that there might be opportunities for your business in these countries? SINGLE CODE

INTERVIEWER NOTE: Sales through the firm’s website would count as ‘enquiries from customers’

Enquiries from customers.................................................. 1 Identified that may be opportunities ................................. 2 (It varies / mixture of both).................................................. 3 (Not entered other countries recently)............................... 4 (Don't know) ............................................................................................................. 5

ASK IF BUSINESS OVER 1 YEAR OLD (CODES 2-8 AT S7) H11a – Now thinking about your business as a whole, < IF S7=6-8 in the last five years / IF S7=2-5 since your business was established> would you say that it has...? READ OUT. SINGLE CODE

AS NECESSARY: This is just your overall impression of the growth of the business taking account of factors like size, number of employees, turnover, etc.

Remained the same size.................................................. 1 Become smaller................................................................ 2 Grown moderately ............................................................ 3 Grown substantially .......................................................... 4 (Don't know) ............................................................................................................. 5 (Refused) .................................................................................................................. 6

ASK IF GROWN (CODES 3-4 AT H11a) H11b – Specifically, have you grown in terms of employee numbers, turnover or both? SINGLE CODE

Employee numbers ......................................................... 1 Turnover ........................................................................... 2 Both .................................................................................. 3 (Neither) ............................................................................. 4 (Don't know) ............................................................................................................. 5 (Refused) .................................................................................................................. 6 ASK ALL H10 – \<IF S7=1 OR 9 Now / IF S7=2-8 Still> thinking about your business as a whole, what growth objectives do you have for the business over the next five years? Do you plan to...? READ OUT

Remain the same size...................................................... 1 Become smaller.............................................................. 2 Grow moderately............................................................ 3 Grow substantially.......................................................... 4 (Don’t know) ..................................................................... 5 (Refused)........................................................................... 6

ASK IF PLANNING TO GROW OR TO REMAIN SAME (CODES 1, 3 OR 4 AT H10) A26 – Would you say that your senior management team has a clear strategy for how your firm will \<IF H10=3-4 achieve its growth objectives / IF H10=1 maintain its current sales levels>? IF YES, PROBE FOR WHETHER VERY OR FAIRLY CLEAR

Yes – very clear strategy.................................................. 1 Yes – fairly clear strategy................................................. 2 No..................................................................................... 3 (Don’t know) ..................................................................... 4 (Not aiming to develop our overseas business).............. 5

ASK IF PLANNING TO GROW (CODES 3-4 AT H10) A27a – You mentioned that you are planning to grow over the next 5 years. Do you expect this growth to mainly come from...? READ OUT. SINGLE CODE.

Entering new overseas countries .............................................................. 1 Or, increasing sales to countries where you are already doing business . 2 (Both).................................................................................. 3 (Don’t know) ........................................................................... 4

ASK IF PLANNING TO GROW (CODES 3-4 AT H10) A27b – And do you expect this growth to mainly come from...? READ OUT. SINGLE CODE.

Selling to new customers ......................................................... 1 Or, increasing sales to your existing customers.............. 2 (Both).................................................................................. 3 (Don’t know) ........................................................................... 4

ASK IF PLANNING TO GROW (CODES 3-4 AT H10) A27c – And do you expect this growth to mainly come from...? READ OUT. SINGLE CODE.

Introducing new products or services................................. 1 Or, increasing sales of your existing products or services .... 2 (Both).................................................................................. 3 (Don’t know) ........................................................................... 4 ASK IF PLANNING TO STAY SAME SIZE (CODE 1 AT H10) A28a – You mentioned that you expect your business to remain the same size over the next 5 years. To help maintain your current sales levels, will you be mainly focussing on...? READ OUT. SINGLE CODE.

Entering new overseas countries .............................................................. 1 Or, selling to countries where you are already doing business .............. 2 (Both) ......................................................................................................... 3 (Don't know) .............................................................................................. 4

ASK IF PLANNING TO STAY SAME SIZE (CODE 1 AT H10) A28b – And will you be mainly focussing on...? READ OUT. SINGLE CODE.

Selling to new customers ........................................................ 1 Or, selling to existing customers ............................................. 2 (Both) ....................................................................................... 3 (Don't know) ............................................................................ 4

ASK IF PLANNING TO STAY SAME SIZE (CODE 1 AT H10) A28c – And will you be mainly focussing on...? READ OUT. SINGLE CODE.

Introducing new products or services .............................................. 1 Or, selling your existing products or services .................................. 2 (Both) ....................................................................................... 3 (Don't know) ............................................................................ 4

ASK IF PLANNING TO BECOME SMALLER (CODE 2 AT H10) A29 – You mentioned that you expect your business to become smaller over the next 5 years. Is this mainly because...? READ OUT. SINGLE CODE.

You don't see any scope or opportunity to grow ....................................... 1 Or, because you don't want to grow and are happy as you are ............ 2 (Other - SPECIFY) .................................................................................... 3 (Don't know) .............................................................................................. 4

A7 - DELETED A8 – DELETED

ASK ALL A9a – Thinking about your business overall, over the next 3 years do you think that you will...? READ OUT. CODE ALL THAT APPLY.

INTERVIEWER NOTE: Pause after reading each option to let the respondent say yes or no.

Develop any new products or services ......................................................... 1 Make fundamental changes or modifications to any of your existing products or services ................................................................. 2 Make more cosmetic changes to any of your existing products or services, such as packaging or translation ........................................... 3 (None of these) ............................................................................................. 4 (Don't know) .............................................................................................. 5 ASK IF PLANNING ANY PRODUCT/SERVICE DEVELOPMENT (CODES 1-3 AT A9a) A9h – And do you expect \<IF A9a=1 this product or service development activity / IF A9a=not 1 the changes to your products or services> to be aimed at UK customers, overseas customers or both? READ OUT. SINGLE CODE.

UK customers.................................................................1 Overseas customers ..........................................................2 Both.................................................................................3 (Don’t know) .....................................................................4

C1d - DELETED A9b - DELETED A9c - DELETED

IF WILL INTRODUCE OR MODIFY PRODUCTS/SERVICES (CODES 1-3 AT A9a) A9f – In your view, are some countries more important than others in terms of being a stimulus for your company’s innovation and product or service development activity?

Yes ...................................................................................1 No ....................................................................................2 (Don’t know) .....................................................................3

IF SOME COUNTRIES MORE IMPORTANT (CODE 1 AT A9f) A9g – And which countries are most important to you in this respect? CODE ALL THAT APPLY

INTERVIEWER NOTE: They don’t need to be doing business in these countries, and they could include the UK.

CATI TO SHOW LIST OF MOST COMMON MARKETS (INCLUDING THE UK), PLUS: Other (SPECIFY)................................................................. (None/Don’t know)

A9d - DELETED A10 - DELETED A11 - DELETED A12 - DELETED A18 - DELETED

CATI TO INSERT TIME MARKER OVERSEAS BUSINESS RISKS

READ OUT TO ALL I'd like to move on to talking about the risks involved in starting to do business in new overseas countries.

ASK ALL B1 – Firstly, have you been put off from doing business in a particular country for any of the following reasons? READ OUT. CODE ALL THAT APPLY.

AS NECESSARY: For each one, please only answer ‘yes’ if you have decided not to do business in a particular country because of this risk.

INTERVIEWER NOTE: Pause after reading each option to let the respondent say yes or no.

The risk of not being paid in full or on time ................................................ 1 The risk to the safety and security of your staff ............................................. 2 The risks associated with political or economic instability in that country . 3 The risk of intellectual property theft (i.e. your products or technology being copied) ................................................................. 4 The risk of encountering bribery, corruption or organised crime ............... 5 The risk of not seeing a return on the investment you would need to make to enter that country ......................................................... 6 (None of these) .......................................................................................... 7 (Don't know) .............................................................................................. 8

ASK ALL B1b – And over the last 2 years, have you significantly altered the way that you do business in any overseas countries for any of the reasons I've just mentioned?

Yes ................................................................................... 1 No ..................................................................................... 2 (Don't know) ..................................................................... 3

ASK IF ALTERED WAY DO BUSINESS (CODE 1 AT B1b) B1c – Specifically, which of these risks has prompted you to significantly alter the way you do business in any overseas countries? READ OUT AS NECESSARY. CODE ALL THAT APPLY.

The risk of not being paid in full or on time ................................................ 1 The risk to the safety and security of your staff ............................................. 2 The risks associated with political or economic instability in that country . 3 The risk of intellectual property theft (i.e. your products or technology being copied) ................................................................. 4 The risk of encountering bribery, corruption or organised crime ............... 5 The risk of not seeing a return on the investment you would need to make to enter that country ......................................................... 6 (None of these) .......................................................................................... 7 (Don't know) .............................................................................................. 8 ASK ALL B2 – Thinking about the types of risk I've just mentioned, overall how risky do you think it is for your firm to do business in each of the following countries? READ OUT.

(a) Brazil (b) Russia (c) India (d) China

ON EACH OF THE B2 SCREENS (AT TOP) READ OUT AS NECESSARY Would you say that doing business in this country is...?

AS NECESSARY: It doesn't matter if you don't have any experience of doing business in this country, I'm just interested in your perception of how risky it is.

Very risky.................................................................1 Fairly risky .................................................................2 Not particularly risky ..................................................3 Not at all risky............................................................4 (Don't know) ..............................................................5

ASK ALL B3 – Thinking about the culture and attitude of your firm and its senior management team, which one of the following best describes how your firm thinks about taking risks when doing business overseas? READ OUT. SINGLE CODE

It's never worth taking any risks ........................................1 It's sometimes worth taking risks provided the commercial benefits are very clear ........................................2 Or, to be a successful business you have to regularly take risks 3 (Don't know) ..................................................................4

CATI TO INSERT TIME MARKER BARRIERS

IF DOING BUSINESS IN MORE THAN ONE MARKET (A1b=3-9)

B4 – Thinking now about all the overseas countries that you have done business in < IF CODES 5-8 AT S7 over the last 5 years / IF CODES 1-4 OR 9 since you were established >, which of these was the most challenging country to do business in? RECORD ONE COUNTRY ONLY

CATI TO SHOW LIST OF MOST COMMON MARKETS, PLUS: Other (SPECIFY) .............................................................. (None/Don’t know/All equally challenging) .......................

B5 - DELETED

CATI TO ALLOCATE <MARKET> AS FOLLOWS: • FROM B4: IF IN MORE THAN ONE MARKET (A1b=3-9) AND MARKET PROVIDED AT B4 • FROM A22: IF IN MORE THAN ONE MARKET (A1b=3-9) & NONE/DON’T KNOW AT B4 • FROM A2: IF ONLY IN ONE MARKET (A1b=2)

READ OUT IF CURRENTLY EXPORTING (CODES 1-4 AT S2a) I’d like to ask you some questions now about your experience of doing business in <MARKET> \<IF A1b=3-9 & NONE/DON’T KNOW AT B4 as you indicated earlier that this is the country you’ve started doing business in most recently>.

C1a - DELETED

ASK IF CURRENTLY EXPORTING (CODES 1-4 AT S2a)

C4 – Did you start doing business in <MARKET> for any of the following reasons? READ OUT. CODE ALL THAT APPLY.

INTERVIEWER NOTE: Pause after reading each option to let the respondent say yes or no.

An existing customer that you were already doing business with requested that you start doing business there........................................... 1 You received an approach or enquiry from a potential customer or partner in <MARKET> ................................................................. 2 A company that you were already doing business with in a different country helped you to start doing business in <MARKET> ....................... 3 There was someone in your company who already had experience of <MARKET> or contacts there...................................................... 4 <MARKET> is at the forefront of developments for your industry .......... 5 (None of these).............................................................................. 6 (Don’t know) .............................................................................. 7 ASK IF ONLY DONE BUSINESS IN ONE MARKET (CODE 2 AT A1b) OR IF ONLY USE ONE MODE (ONLY ONE OF CODES 1-4 SELECTED AT S2a)

B9 – Based on what you told me earlier about your overseas business, I believe that you do business in <MARKET> by...

CATI TO LIST ALL OF THE FOLLOWING THAT APPLY

IF S2a=1: Selling direct to customers. IF S2a=2: Selling through agents or distributors. IF S2a=3: Licensing, franchising or other contractual arrangements (such as joint ventures). IF S2a=4: Operating your own site or office in <MARKET>.

Is that correct or do you do business in <MARKET> in any different ways?

Yes – correct ................................................................. 1 No – use different ways .................................................. 2 (Don’t know) ..................................................................... 3

ASK IF DOING BUSINESS IN >1 MKT & USE MORE THAN 1 MODE (CODES 3-9 AT A1b & MORE THAN ONE OF CODES 1-4 SELECTED AT S2a) OR INFO WRONG AT B9 (CODE 2 AT B9)

B7 – In which of the following ways have you done business in <MARKET>?

READ OUT – CODE ALL THAT APPLY – DO NOT RANDOMISE

Selling directly to customers in <MARKET> ......................... 1 Selling through agents or distributors in <MARKET> ............. 2 Licensing, franchising or other contractual arrangements such as joint ventures ......................................................... 3 Operating your own site or office in <MARKET> .................. 6 (None of these) .................................................................. 7 (Don’t know) ..................................................................... 8

IF OVERSEAS SITE (CODE 6 AT B7)

B8a – Thinking about your site in <MARKET>, which of the following purposes does it have...? READ OUT. CODE ALL THAT APPLY.

INTERVIEWER NOTE: IF THE FIRM HAS SEVERAL SITES IN THIS COUNTRY ASK THEM THE PURPOSE OF THEIR MOST IMPORTANT SITE

Manufacturing or assembly ........................................... 1 Call centre ........................................................................ 3 Distribution or sales office ............................................. 4 Service delivery ............................................................. 6 Research, product or process development .................. 7 (Don’t know/None of these) .............................................. 8 IF MORE THAN ONE PURPOSE (MORE THAN ONE CODE SELECTED AT B8a)

B8b – And which of these is the MAIN purpose of this site? READ OUT AS NECESSARY. SINGLE CODE.

CATI TO ONLY DISPLAY CODES SELECTED AT B8a (& DON'T KNOW)

- Manufacturing or assembly ......................... 1
- Call centre .................................................. 3
- Distribution or sales office ............................ 4
- Service delivery .......................................... 6
- Research, product or process development .... 7
- (Don't know/None of these) ............................ 8

MODE REFERENCES

M1 - Selling direct (B7=1 OR (S2a=1 & B9=1)) M2 - Selling through agents/distributors (B7=2 OR (S2a=2 & B9=1)) M3 – Licensing, franchising, other contractual (B7=3 OR (S2a=3 & B9=1)) M6 – Production site ((B7=6 & B8a=1) OR (S5c=1 & B9=1)) M7 – Call centre (B7=6 & B8a =3) OR (S5c=3 & B9=1)) M8 – Sales/service site (B7=6 & B8a =4-6) OR (S5c=4-6 & B9=1)) M9 – R&D site (B7=6 & B8a =7) OR (S5c=7 & B9=1)) M10 – Unknown site (B7=6 & B8a =8) OR (S5c=8 & B9=1)) M11 – Unknown mode (B7=7-8 OR B9=3)

IF M6, 7 OR 9 & NOT M8

C1b – Can I just check, does your site in < MARKET > sell any products or services directly to any customers in < MARKET >? READ OUT

- Yes ........................................................................................................ 1
- No ......................................................................................................... 2
- (Don't know) ...................................................................................... 3 ASK IF CURRENTLY EXPORTING (S2a=1-4) E1 – I’m now going to read out a list of issues that you may have had to tackle when trying to develop your business in <MARKET>. For each one, please give me a score of 1 to 5 for the extent to which you feel that this has been a difficulty, where 1 means it has ‘not been at all difficult’ and 5 means it has been ‘extremely difficult’. So firstly... READ OUT. ROTATE LIST BUT ALWAYS ASK B, C & D IN ORDER

ON EACH OF THE E1 SCREENS (AT BOTTOM) AS NECESSARY To what extent has this been a difficulty in <MARKET> (where 1 means it has ‘not been at all difficult’ and 5 means it has been ‘extremely difficult’)

INTERVIEWER NOTE: If respondent says it is not relevant or doesn't apply, then code as ‘1 – Not at all difficult’

(a) Obtaining basic information about doing business in <MARKET> (b) Identifying who to make contact with in the first instance < IF M2-3 or finding a suitable partner > (c) Establishing an initial dialogue with prospective < IF M1, M3, M8, M10, M11 OR YES AT C1b customers or > business partners in <MARKET> (d) Building relationships with key influencers or decision-makers (i) IF M1-3, M8, M10, M11 OR YES AT C1b: A preference on the part of customers in <MARKET> for doing business with firms from <MARKET>

AS NECESSARY: For example, where customers in France prefer to buy from French companies rather than UK ones. (k) Finding the necessary management time to devote to doing business in <MARKET> (r) Dealing with legal or tax regulations or standards in <MARKET> (s) Negotiating the culture and language (t) Protecting your intellectual property (w) Ensuring you get paid and enforcing contracts (x) Dealing with customs procedures or paperwork

1 – Not at all difficult ......................................................... 1 2 ...................................................................................... 2 3 ...................................................................................... 3 4 ...................................................................................... 4 5 – Extremely difficult ...................................................... 5 (Don't know) .............................................................................. 6

ASK IF NO SIGNIFICANT BARRIERS (CODES 1-3 OR 6 AT ALL OF E1a-x) E5 – Were there any other significant difficulties that you encountered in <MARKET> that I haven't already mentioned? IF YES, PROBE FOR DETAILS

Yes (SPECIFY) ................................................................. 1 No...................................................................................... 2 (Don't know) .............................................................................. 3 ASK IF PROBLEMS WITH PROTECTING IP (CODES 3-5 AT E1t)

E4 – You mentioned that you had experienced problems with protecting your intellectual property in <MARKET>. Specifically, did you have difficulty with...?

INTERVIEWER NOTE: Pause after reading each option to let the respondent say yes or no.

Obtaining protection for your intellectual property in <MARKET> ........................................ 1 Enforcing your intellectual property protection in <MARKET> ........................................ 2 (Neither of these) ........................................................................................................ 95 (Don’t know) ............................................................................................................. 97

E2 - DELETED E3 – DELETED G10f - DELETED

CATI TO INSERT TIME MARKER AWARENESS & USE OF UKTI

READ OUT TO ALL I’d now like to ask you some questions about sources of information or advice that are available to help UK firms do business overseas.

ASK ALL F2 – Prior to this interview, had you heard of...? READ OUT

(a) UK Trade & Investment or UKTI (b) The commercial services provided by British embassies and consulates overseas

Yes ................................................................. 1 No ........................................................................ 2 (Don’t know) ...................................................... 3

IF AWARE OF UKTI (CODE 1 AT F2a) F3a – And has your firm used any of UK Trade & Investment’s services?

Yes ........................................................................ 1 No ........................................................................ 2 (Don’t know) ...................................................... 3

IF AWARE OF POSTS (CODE 1 AT F2b) F3b – And has your firm obtained any business information or advice from any British embassies or consulates overseas?

AS NECESSARY: It doesn’t matter whether or not you had to pay for this, if you have received any information or advice then please answer yes.

Yes ........................................................................ 1 No ........................................................................ 2 (Tried to but got no help) ........................................ 4 (Don’t know) ...................................................... 3

F4a - DELETED ASK IF CURRENTLY EXPORTING (CODES 1-4 AT S2a) F4b – Now thinking specifically about your experiences of doing business in <MARKET> (from Market Allocation in Barriers section), have you done any of the following? READ OUT. CODE ALL THAT APPLY.

INTERVIEWER NOTE: Pause after reading each option to let the respondent say yes or no.

ONLY IF F3a=1 OR F3b=1: Obtained information, advice or support about <MARKET> from \<IF F3a=1 & F3b=not1 UKTI / IF F3a=not1 & F3b=1 a British embassy or consulate overseas / IF 3a=1 & F3b=1 UKTI or a British embassy or consulate overseas> ................................................................. 1 Commissioned information, advice or support about <MARKET> from any <IF F3a=1 OR F3b=1 other> external organisations ........................................ 2 Received less formal advice or help from friends, family or business associates ........................................................................................................... 3 (None of these) ........................................................................................................ 4 (Don't know) ........................................................................................................ 5

F5 - DELETED F4b - DELETED F2k - DELETED F2m - DELETED F2j - DELETED F2l - DELETED F2n – DELETED

CATI TO INSERT TIME MARKER SECTION I – MARKETING

ASK ALL I1 – I’d now like to ask you a few questions about the types of media channels that you personally use and how useful these are to your business. So, do you get news or information that’s relevant to your business from either of the following? READ OUT. CODE ALL THAT APPLY. DO NOT RANDOMISE ORDER

Social networking sites ..................................................... 8 Other websites ................................................................. 9 (None of these) .................................................................. 10 (Don’t know) ................................................................. 11

IF CODE 8 AT I1 I2h – And how useful are social networking sites as a source of news or information that is relevant to your business? Please answer on a scale of 1-5 where 1 is ‘not at all useful’ and 5 is ‘extremely useful’.

1 – Not at all useful ........................................................... 1 2 ....................................................................................... 2 3 ....................................................................................... 3 4 ....................................................................................... 4 5 – Extremely useful ......................................................... 5 (Don’t know) ..................................................................... 6

I2i - DELETED

IF DO NOT USE SOCIAL NETWORKING (I1 IS NOT CODE 8) I3b – Do you expect to use any social networking sites for business purposes within the next year?

Yes ................................................................................... 1 No ..................................................................................... 2 (Don’t know) ..................................................................... 3

ASK ALL I4 – During the last year, have you attended any business seminars, tradeshows or conferences?

Yes ................................................................................... 1 No ..................................................................................... 2 (Don’t know) ..................................................................... 3

IF CODE 1 AT I4 I5 – How useful do you find these events as a source of information or news that is relevant to your business? AS NECESSARY. Please answer on a scale of 1-5 where 1 is ‘not at all useful’ and 5 is ‘extremely useful’.

1 – Not at all useful ........................................................... 1 2 ....................................................................................... 2 3 ....................................................................................... 3 4 ....................................................................................... 4 5 – Extremely useful ......................................................... 5 (Don’t know) ..................................................................... 6 Finally, I'd now like to ask you some questions about your business just to classify your answers for analysis purposes.

**ASK ALL**

**H2a – How many people are currently employed by your business in the UK?**

**AS NECESSARY** Please include both full and part-time staff.

INTERVIEWER NOTE – If the respondent owns the company and does not employ anyone else, please code as zero employees.

Write in number (0+):

(Don’t know) – PROMPT WITH RANGES

(Refused)

**IF DON’T KNOW AT H2a**

**H2b – If you had to estimate, approximately how many people are employed by your business in the UK? READ OUT AS NECESSARY**

No employees .................................................................1 1-4 .................................................................................2 5-9 .................................................................................3 10-19 .............................................................................4 20-49 .............................................................................5 50-99 .............................................................................6 100-199 .........................................................................7 200-249 .........................................................................8 250-499 .........................................................................9 500 or more .....................................................................10 (Don’t know) .................................................................11 (Refused)........................................................................12

**H2c - DELETED**

**H2d - DELETED**

**H2e - DELETED**

**H19a - DELETED**

**H19b - DELETED**

**H19c - DELETED**

**H20a - DELETED** ASK ALL H3b –< IF S7=NOT 1 & NOT 9 AND S7b=NOT 2 Can I just ask, what is the current annual turnover of your business? / IF S7=1 OR 9 OR S7b=2 What do you anticipate will be the turnover of your business in the first year of trading?> READ OUT AS NECESSARY

AS NECESSARY By this I mean your annual sales, income or receipts.

IF OVERSEAS SITE (CODE 4 AT S2a): AS NECESSARY: Please include sales from any overseas sites or subsidiaries that you control from the UK.

IF FOREIGN OWNED (CODES 2-3 AT H1b): AS NECESSARY: Please just focus on your UK firm, not your parent company

£0 ................................................................................... 1 £100,000 or less............................................................... 2 £100,001 - £500,000 ...................................................... 3 £500,001 - £2million .................................................... 4 £2million - £10million .................................................. 5 £10million - £25million ............................................... 6 £25million - £50million ............................................... 7 £50million - £500million ............................................. 8 More than £500million ............................................... 9 (Don't know) ..................................................................... 10 (Refused)........................................................................ 11

H3c - DELETED

ASK ALL UNLESS ESTABLISHED IN LAST TWO YEARS (I.E. NOT 1-2 OR 9 AT S7 & NOT CODE 2 AT S7b) H7a – Have you introduced any new products or services over the last three years?

Yes ............................................................................... 1 No .................................................................................. 2 (Don't know) ..................................................................... 3

ASK IF YES AT H7a H7b - And are these new products or services... READ OUT - SINGLE CODE ADD AS NECESSARY: By completely new I mean that, to the best of your knowledge, they have not been introduced by anyone before you READ OUT – SINGLE CODE

Just new to your business .................................................. 1 New to your industry or sector........................................... 2 Or, are they completely new to the world .......................... 3 (Some are just new to the business and some are completely new) ...... 4 (Don't know) ..................................................................... 5 ASK ALL EXCEPT NO EMPLOYEES (0 AT H2A OR CODE 1 AT H2B) OR CODES 2, 3 OR 4 AT H7b

H4a – Approximately how many of your UK employees are engaged either wholly or partly in R&D activity? READ OUT AS NECESSARY

AS NECESSARY: By R&D I mean ‘research and development’

Zero .................................................................................. 1 One ................................................................................... 2 2-4 .................................................................................... 3 5-9 .................................................................................... 4 10-19 .............................................................................. 5 20-49 .............................................................................. 6 50-99 .............................................................................. 7 100-199 ......................................................................... 8 200-249 ......................................................................... 9 250-499 ......................................................................... 10 500 or more ..................................................................... 11 (Don't know) ..................................................................... 12 (Refused) .......................................................................... 13

ASK IF H4a IS CODES 2-11

H4b – Can I just check, are any of these employees involved in activities that could be described as ‘the development of scientific or technical knowledge that is NOT commonly available’?

Yes ................................................................................... 1 No ..................................................................................... 2 (Don't know) ..................................................................... 3

ASK ALL EXCEPT NO EMPLOYEES (0 AT H2A OR CODE 1 AT H2B) OR CODES 2, 3 OR 4 AT H7b OR CODE1 AT H4a

H5 – And approximately how many of your UK employees are engaged either wholly or partly in new product or service development? READ OUT AS NECESSARY

Zero .................................................................................. 1 One ................................................................................... 2 2-4 .................................................................................... 3 5-9 .................................................................................... 4 10-19 .............................................................................. 5 20-49 .............................................................................. 6 50-99 .............................................................................. 7 100-199 ......................................................................... 8 200-249 ......................................................................... 9 250-499 ......................................................................... 10 500 or more ..................................................................... 11 (Don't know) ..................................................................... 12 (Refused) .......................................................................... 13 ASK ALL EXCEPT CODES 2, 3 OR 4 AT H7b OR (CODE 1 AT H4b & CODES 3-11 AT H4a & CODES 3-11 AT H5)

H6 – In the last year have you commissioned anyone external to your business to conduct any R&D or new product or service development activity for you?

Yes ................................................................. 1 No ........................................................................ 2 (Don’t know) ....................................................... 3

Analysis

Innovative Firms

• ‘Innovative’ firms are those that... • Have more than one employee engaged in R&D activity (H4a) and more than one employee engaged in new product or service development (H5) • Or, have employed someone external to conduct new product or service development in the last year (H6) • Or, derive at least some turnover from products & services introduced in the last 3 years (H7a) except firms established in the last 2 years

Innovative Firms – Alternative (Tighter) Definition

• ‘Innovative’ firms (by the alternative measure) are those that... • Have more than one employee engaged in R&D activity (H4a) and more than one employee engaged in new product or service development (H5) and at least some R&D employees are engaged in the ‘development of scientific or technical knowledge that is not commonly available’ (H4b) • Or, have employed someone external to conduct new product or service development in the last year (H6) • Or, derive at least some turnover from products & services introduced in the last 3 years (H7a) except firms established in the last 2 years and these products & services are either ‘new to the world’ or ‘new to the industry/sector’ (H7b)

ASK ALL

H8b – Have you either applied for or obtained any patents, trademarks, design rights or other legal protection, either in the UK or overseas, for any of your products or services?

Yes ................................................................. 1 No ........................................................................ 2 (Don’t know) ....................................................... 3

IF IP PROTECTION (CODE 1 AT H8b)

H8e – And is this...? READ OUT. CODE ALL THAT APPLY

Patents ............................................................. 1 Trademarks ....................................................... 2 Design rights ..................................................... 3 Or other legal protection .................................... 4 (Don’t know) ..................................................... 5 IF IP PROTECTION (CODE 1 AT H8b) H8c – And do these relate to the UK, overseas countries or both? SINGLE CODE

AS NECESSARY: Please include all patents, trademarks, design rights and other legal protection

- UK ................................................................. 1
- Overseas .......................................................... 2
- Both ..................................................................... 3
- (Don’t know) ...................................................... 4

IF OVERSEAS PATENTS (CODE 1 AT N8e & CODES 2-3 AT H8c) H8d – Does your firm hold any ‘triadic patents’, by which I mean you hold a patent in the US, EU and Japan for the same product or innovation?

INTERVIEWER NOTE: ONLY CODE YES IF SAME PATENT HELD IN ALL THREE MARKETS

- Yes ..................................................................... 1
- No ....................................................................... 2
- (Don’t know) ...................................................... 3
- (Refused) ............................................................ 4

ASK ALL H8f – Can I just check, have you ever heard of the UK government’s overseas Intellectual Property attaché network?

EXPLAIN AS NECESSARY: The UK Government has recently established a network of Intellectual Property attachés based in China, India, Brazil and South East Asia. This network will be used to strengthen advice and support on Intellectual Property Protection in these markets with a view to further developing trade for UK companies there.

- Yes ..................................................................... 1
- No ....................................................................... 2
- (Don’t know) ...................................................... 3

ASK ALL H9a – Moving on, do you have a current, written business plan?

- Yes ..................................................................... 1
- No ....................................................................... 2
- (In progress/currently writing business plan) ............... 5
- (Don’t know) ...................................................... 3
- (Refused) ............................................................ 4

H9b - DELETED ASK ALL G10a – Over the last 6 months, has your business had any difficulties in obtaining finance, either from within the company or from external sources?

INTERVIEWER NOTE: If respondent says it is not applicable or they haven’t tried to obtain finance, then code as ‘no’

Yes ................................................................................... 1 No ..................................................................................... 2 (Don’t know) .................................................................... 3 (Refused) ........................................................................ 4

IF DIFFICULTIES ACCESSING FINANCE (G10a=1) G10e – Have these difficulties obtaining finance had any negative impact on the scale or scope of your <IF S2b=1 planned> overseas activities? SINGLE CODE.

Yes ................................................................................... 1 No ..................................................................................... 3 (Don’t know) .................................................................... 4

H18a - DELETED H18b - DELETED H18c - DELETED H21 - DELETED

CATI TO INSERT TIME MARKER ASK ALL H14 – That’s the end of the interview, thank you very much for taking part. I just need to check a few things before you go. Would you be willing to take part in any future UK Trade & Investment research on this topic?

AS NECESSARY If you say ‘yes’ you can always decline at the time if it’s not convenient.

Yes ................................................................................... 1 No ..................................................................................... 2 (Don’t know) ..................................................................... 3

ASK ALL H17d – Would you like us to email you some more information on the services that UKTI provide to help UK firms do business overseas? READ OUT

Yes ................................................................................... 1 No ..................................................................................... 2 (Don’t know) ..................................................................... 3

ASK ALL H17a - We will be producing a report of the results from this survey. Would you like us to email you an electronic link to this report when it’s published? READ OUT

ADD AS NECESSARY The report will be available later this year.

Yes ................................................................................... 1 No ..................................................................................... 2 (Don’t know) ..................................................................... 3

IF YES AT H17a OR H17d H17b - Can I take your e-mail address? AS NECESSARY: This will only be used to email you < IF YES AT H17d some information about UKTI services / IF YES AT H17d & H17a and / IF YES AT H17a a link to the report > and will not be passed on to anyone else.

INTERVIEWER NOTE: PLEASE MAKE SURE YOU RECORD THE EMAIL ADDRESS CORRECTLY, & READ IT BACK TO THE RESPONDENT TO CHECK SPELLINGS ETC

Yes (WRITE IN) ................................................................ 1 No ..................................................................................... 2 (Don’t know) ..................................................................... 3

H17c - DELETED

CATI TO INSERT TIME MARKER ASK ALL H15 – Finally as proof of this interview please could I just confirm your business postcode? CATI TO DISPLAY POSTCODE IF AVAILABLE – AMEND IF MISSING OR INCORRECT

........................................................................................................................................

ASK ALL H16 – And may I take a note of your name?

........................................................................................................................................

STANDARD THANK & CLOSE